1. 4-3 LOAN CALCULATIONS AND REGRESSION
Banking
4/19/2017
4-3 LOAN CALCULATIONS AND REGRESSION
OBJECTIVES
Calculate the present value of a single deposit investment.
Calculate the present value of a periodic deposit investment.
Chapter 1

2. Key Terms monthly payment calculator natural logarithm
linear regression equation
quadratic regression equation
cubic function
cubic regression equation

3. Example 1
Hannah is taking out a 4.3% loan to purchase an $18,000 car. The length of the loan is 8 years. How much will she pay in interest?

4. Exponential Bases and Natural Logarithms

5. Loan Length Formula
M = monthly payment
p = principal
r = interest rate
t = number of years

6. Example 2
Claude wants to borrow $25,000 to purchase a car. After looking at his monthly budget, he realizes that all he can afford to pay per month is $300. The bank is offering a 5.9% loan. What would need to be the length of his loan be so that he can stay within his budget?

7. EXAMPLE 3
This lesson opened with a discussion about a $100,000 loan with an APR of 7.5% taken out in January 2010 for a period of 15 years. Examine the table of decreasing loan balances over the 15-year period. Use regression to determine a curve of best fit for this data.

8. CHECK YOUR UNDERSTANDING
Use the linear, quadratic, and cubic regression equations determined in Example 3 to compare the computed loan balances when x = 2 with the loan balance amount given in the chart for 2011.