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Student Loans

This lesson covers the essentials of single-payment loans, including how to calculate maturity value and interest rates. A loan can help you achieve goals like earning a college degree or buying a car. Learn key terms such as promissory note, maturity value, and the difference between ordinary and exact interest. Through practical examples, such as loans granted at specified interest rates for certain periods, you will master the computations necessary to assess loan repayments effectively.

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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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