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Student Loans

Student Loans Someday you might want to earn a college degree, buy a car, or purchase a home. A loan can help you reach those goals. Why might you consider obtaining a loan?. Lesson Objective Compute the maturity value and interest rate of a single-payment loan. Content Vocabulary.

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Student Loans

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  1. Student Loans Someday you might want to earn a college degree, buy a car, or purchase a home. A loan can help you reach those goals. Why might you consider obtaining a loan?

  2. Lesson Objective Compute the maturity value and interest rate of a single-payment loan. Content Vocabulary • single-payment loan single-payment loan A loan you repay with one payment after a specified period of time. promissory note A written promise to pay a certain sum of money on a specific date in the future. maturity value The total amount you must repay for a loan. • promissory note • maturity value

  3. Lesson Objective Compute the maturity value and interest rate of a single-payment loan. Content Vocabulary • term term The amount of time for which a loan is granted. ordinary interest Interest on a loan calculated by basing the loan’s time period on a 360-day year. exact interest Interest on a loan calculated by basing the loan’s time period on a 365-day year. • ordinary interest • exact interest

  4. Example 1 Anita Sloane’s bank granted her a single-payment loan of $72,000 for 91 days at 12 percent ordinary interest. What is the maturity value of the loan?

  5. Example 1 Answer: Step 1 Find the ordinary interest owed. Principal × Rate × Time $7,200.00 × 12% × 91/360 = $218.40

  6. Example 1 Answer: Step 2 Find the maturity value. Principal + Interest Owed $7,200.00 + $218.40 = $7,418.40

  7. Example 2 Anita Sloane’s bank granted her a single-payment loan of $72,000 for 91 days at 12 percent exact interest. What is the maturity value of the loan?

  8. Example 2 Answer: Step 1 Find the exact interest owed. Principal × Rate × Time $7,200 × 12% × 91/365 = $215.408 or $215.41

  9. Example 2 Answer: Step 2 Find the maturity value. Principal + Interest Owed $7,200.00 + $215.41 = $7,415.41

  10. Practice 1 Single payment loan of $2,750. Interest rate of 11 percent. Exact day of interest: 50. What is the interest owed?

  11. Practice 1 Answer $41.44

  12. Practice 2 Emily Andrews borrowed $16,382. Her bank granted her a single-payment loan for 286 days at 11.5 percent ordinary interest. What is the interest owed? What is the maturity value of her loan?

  13. Practice 2 Answer Interest owed: $1,496.68 Maturity value of loan: $17,878.68

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