1. Simple Interest Installment Loans pp. 290-293 8-3 SECTION

2. Click to edit Master text styles Second level Third level Fourth level Fifth level 2 SECTION Copyright © Glencoe/McGraw-Hill MBA, Section 8-3, Slide 2 of 20 8-3 simple interest installment loan (p. 290) A loan repaid with equal monthly payments. annual percentage rate (p. 290) An index showing the cost of borrowing money on a yearly basis, expressed as a percent. Key Words to Know

3. Click to edit Master text styles Second level Third level Fourth level Fifth level 3 SECTION Copyright © Glencoe/McGraw-Hill MBA, Section 8-3, Slide 3 of 20 8-3 Monthly Payment = Amount of Loan ÷ $100 × Monthly Payments for a $100 Loan Formula 1

4. Click to edit Master text styles Second level Third level Fourth level Fifth level 4 SECTION Copyright © Glencoe/McGraw-Hill MBA, Section 8-3, Slide 4 of 20 8-3 Total Amount Repaid = Number of Payments × Monthly Payments Formula 2

5. Click to edit Master text styles Second level Third level Fourth level Fifth level 5 SECTION Copyright © Glencoe/McGraw-Hill MBA, Section 8-3, Slide 5 of 20 8-3 Finance Charge = Total Amount Repaid – Amount Financed Formula 3

6. Click to edit Master text styles Second level Third level Fourth level Fifth level 6 SECTION Copyright © Glencoe/McGraw-Hill MBA, Section 8-3, Slide 6 of 20 8-3 Carol Ina obtained an installment loan of $1,800.00 to purchase some new furniture. The annual percentage rate is 8 percent. She must repay the loan in 18 months. What is the finance charge? Example 1

7. Click to edit Master text styles Second level Third level Fourth level Fifth level 7 SECTION Copyright © Glencoe/McGraw-Hill MBA, Section 8-3, Slide 7 of 20 8-3 Find the monthly payment. Amount of Loan ÷ $100 × Monthly Payments for a $100 Loan $1,800.00 ÷ $100.00 × $5.91 = $106.38 Example 1 Answer: Step 1

8. Click to edit Master text styles Second level Third level Fourth level Fifth level 8 SECTION Copyright © Glencoe/McGraw-Hill MBA, Section 8-3, Slide 8 of 20 8-3 Find the total amount repaid. Number of Payments × Monthly Payment 18 × $106.38 = $1,914.84 Example 1 Answer: Step 2

9. Click to edit Master text styles Second level Third level Fourth level Fifth level 9 SECTION Copyright © Glencoe/McGraw-Hill MBA, Section 8-3, Slide 9 of 20 8-3 Find the finance charge. Total Amount Repaid – Amount Financed $1,914.84 – $1,800.00 = $114.84 Example 1 Answer: Step 3

10. Click to edit Master text styles Second level Third level Fourth level Fifth level 10 SECTION Copyright © Glencoe/McGraw-Hill MBA, Section 8-3, Slide 10 of 20 8-3 Fulio and Julio Fernandez purchase a refrigerator with an installment loan that has an APR of 12 percent. The refrigerator sells for $1,399.99. The store financing requires a 10 percent down payment and 12 monthly payments. What is the finance charge? Example 2

11. Click to edit Master text styles Second level Third level Fourth level Fifth level 11 SECTION Copyright © Glencoe/McGraw-Hill MBA, Section 8-3, Slide 11 of 20 8-3 Find the amount financed. Selling Price – Down Payment $1,399.99 – (0.10 × $1,399.99) $1,399.99 – $140.00 = $1,259.99 Example 2 Answer: Step 1

12. Click to edit Master text styles Second level Third level Fourth level Fifth level 12 SECTION Copyright © Glencoe/McGraw-Hill MBA, Section 8-3, Slide 12 of 20 8-3 Find the monthly payment. (Refer to the Monthly Payment on a Simple Interest Installment Loan of $100 on page 799 in your textbook). Amount of Loan ÷ $100 × Monthly Payment for a $100 Loan $1,259.99 ÷ $100.00 × $8.88 = $111.887 or $111.89 Example 2 Answer: Step 2

13. Click to edit Master text styles Second level Third level Fourth level Fifth level 13 SECTION Copyright © Glencoe/McGraw-Hill MBA, Section 8-3, Slide 13 of 20 8-3 Find the total amount repaid. Number of Payments × Monthly Payment 12 × $111.89 = $1,342.68 Example 2 Answer: Step 3

14. Click to edit Master text styles Second level Third level Fourth level Fifth level 14 SECTION Copyright © Glencoe/McGraw-Hill MBA, Section 8-3, Slide 14 of 20 8-3 Find the finance charge. Total Amount Repaid – Amount Financed $1,342.68 – $1,259.99 = $82.69 Example 2 Answer: Step 4

15. 291: 1-21