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8.2 & 8.3 Homework Solutions

8.2 & 8.3 Homework Solutions. 459: 35.a. I = (4000)(0.0825)(0.75) = $247.50 b. $4,247.50 465: A = $10,000(1 + 0.04) 2 = $10,816 $816 in interest earned A = $8,000(1 + 0.06) 3 = $9,528.13 $1,528.13 in interest earned. Math 132: Foundations of Mathematics. Amy Lewis

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8.2 & 8.3 Homework Solutions

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  1. 8.2 & 8.3 Homework Solutions • 459: 35.a. I = (4000)(0.0825)(0.75) = $247.50 b. $4,247.50 • 465: • A = $10,000(1 + 0.04)2 = $10,816 $816 in interest earned • A = $8,000(1 + 0.06)3 = $9,528.13 $1,528.13 in interest earned Math 132: Foundations of Mathematics

  2. Math 132:Foundations of Mathematics Amy Lewis Math Specialist IU1 Center for STEM Education Math 132: Foundations of Mathematics

  3. 8.5 Installment Buying • Determine the amount financed, the installment price, and the finance charge for a fixed loan. • Determine the APR. Math 132: Foundations of Mathematics

  4. Installment Buying • Installment buying is when you repay a loan for the cost of a product on a monthly basis. For example, using a credit card. • An installment loan is one that you can pay off with weekly or monthly payments or payments in some other time period. For example, a car loan. • What are the advantages of this kind of a loan? Math 132: Foundations of Mathematics

  5. Fixed Installment Loans • A loan that has a schedule for paying a fixed amount each period. Amount Financed = Cash price – Down payment Total Installment Price = Total of all monthly payments + Down payment Finance Charge = Total installment price – Cash price Math 132: Foundations of Mathematics

  6. Fixed Installment Loans • The cost of a new car is $14,000. You can finance the car by paying $280 down and $315 per month for 60 months. • Determine the amount financed. • Determine the total installment price. • Determine the finance charge. Math 132: Foundations of Mathematics

  7. Annual Percentage Rate • APR is the interest rate per year. • The loan with the lowest APR is the one that charges the least interest. • At what rate did we finance our new car? Math 132: Foundations of Mathematics

  8. Annual Percentage Rate • Steps in using an APR Table • Compute the finance charge per $100 financed: Finance charge x $100 Amount financed • Find therow corresponding to the number of payments and find the entry closest to the value in step 1. • Find the APR at the top of the column in which the entry from step 2 is found. Math 132: Foundations of Mathematics

  9. Annual Percentage Rate • Determine the APR for our new car loan. Math 132: Foundations of Mathematics

  10. Computing Unearned Interest • Unearned interest is the amount by which a loan’s finance charge is reduced when the loan is paid off early. Actuarial Method u = unearned interest k = remaining number of scheduled payments (excluding current payment) R = regular monthly payment V = finance charge per $100 for a loan with the same APR and k monthly payment Math 132: Foundations of Mathematics

  11. Computing Unearned Interest • Instead of making the 24th payment on the car loan, we decide to pay the remaining balance and terminate the loan. • Use the actuarial method to determine how much interest will be saved by repaying the loan early. • Find the payoff amount. Current payment + total of remaining payments – interest saved Math 132: Foundations of Mathematics

  12. Homework • 488: 11 & 12 • Work on your project! Next Session: Monday, April 12 Math 132: Foundations of Mathematics

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