1 / 12

APR and Rule of 78 Calculation for Finance Charges

Learn how to calculate the charge per $100 financed and the APR using the Rule of 78 and formula methods. Examples provided.

issac
Télécharger la présentation

APR and Rule of 78 Calculation for Finance Charges

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. 13.3 Annual Percentage Rate (APR) and the Rule of 78 1

  2. Page 910: Charge per $100 financed Jimmie bought new electronic equipment for his business for $7325. He agreed to pay 50 monthly payments of $188.80. Find the charge per $100 financed. Payments 50 x $188.80 = $9440.00 Amount financed 7325.00 Finance charge $2115.00 Finance charge per $100 2

  3. Finding the APR using the table on page 909 Jimmie bought new electronic equipment for his business for $6324. He agreed to pay 42 monthly payments of $198.75. What was the APR on this purchase? Payments 42 x $198.75 = $8347.50 Amount financed 6324.00 Finance charge $2023.50 Finance charge per $100 APR = 16  % 3

  4. Finding the APR using the table on page 909 Jimmie bought new electronic equipment for his business for $6324. He agreed to pay 42 monthly payments of $198.75. What was the APR on this purchase? Payments 42 x $198.75 = $8347.50 Amount financed –6324.00 Finance charge $2023.50 Finance charge per $100 4

  5. Page 917: Approximating the APR by Formula m = the number of payment periods per year I = the interest (or finance charge) P = the principal ( amount financed) n = the number of periodic payments to be made 5

  6. Suppose you purchase furniture for $2100. You pay 16% down and sign a contract to repay the balance in 28 equal monthly payments. The finance charge on the balance is 8.9% simple interest. Estimate the APR to the nearest tenth of a percent using the formula. m = 12 P = $2100 – 0.16*$2100 = $1764 I = $1764*0.089 *28/12= $366.324= $366.32 n = 28 6

  7. Finance Charge You take out a consumer loan at your credit union for new insulated windows for your house. The total installed cost is $10,100 of which you pay 14% down. The balance is to be paid in 60 equal monthly payments with a finance charge equal to 9.3% add-on interest on the outstanding balance. Find the finance charge. Principal financed $10,100 – 0.14 x $10,100 = $8686.00 Time 60/12 = 5 years Finance charge 0.093 x $8686.00x 5 = $4039.00 7

  8. Page 912: Formula for Unearned Interest u r is number of remaining payments n is number of payments and F is the finance charge A flower shop owner wants to pay off the loan on a used delivery van that was purchased 16 months ago. The 2-year installment plan used to purchase the van included a $250 finance charge and called for payments of $210 monthly. What amount is needed to pay off the loan? r = 8 n = 24 F = $250 Payment = 8  $210  $30 = $1650.00 8

  9. Monthly Payment You take out a consumer loan at your credit union for new insulated windows for your house. The total installed cost is $3,400 of which you pay 12% down. The balance is to be paid in 24 equal monthly payments with a finance charge equal to 5.4% add-on interest on the outstanding balance. Find the monthly payment. Amount Financed $3400 – 0.12 x $3400 = $2992 Time 24/12 = 2 years Finance charge $2992 x 0.054 x 2 = $323.14 Monthly Payment ($2992.00 + $323.14)/24 = $138.13 9

  10. Page 913: Actuary Formulas for the Refund u and the Payoff The refund u is given by The payoff is given by Where r is the number of remaining payments, PMT is the payment, and V is the value from the APR table corresponding to r. Where PMT is the payment, and r is the number of remaining payments. 10

  11. Example Tony bought a dinette set for $990. The 24 payments were $46.20 each with an APR of 14%. After 18 months, Tony has decided to pay off the loan. Find • the refund using the formula. • the payoff using the formula. r = 6 V = $4.12 11

  12. Finance Charge per $100 If a closed-end loan requires n equal monthly payments and APR denotes the true annual interest rate for the loan (as a decimal), then the finance charge per $100 financed is given by Example Determine the finance charge per $100 financed 69 monthly payments and an APR of 6.2%. 12 END

More Related