Calculating Down Payment & Amount Financed in Installment Loans
Learn how to calculate down payments and amount financed for installment loans, key formulas, effects of larger down payments, and the purpose of credit. Discover the 20/10 rule and make financial decisions wisely.
Calculating Down Payment & Amount Financed in Installment Loans
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Presentation Transcript
Warm Up Problem • Number 11 on page 326 of text book • Solution: • Ordinary Interest= P x R x (days/360) • OI = 21,400 x .085 x 120/360 • OI = 606.33 • Maturity Value = Principal + Interest • 21,400 + 606.33 = 22,006.33
Section 8.2 Calculate the down payment and the amount financed on an installment loan
Key Terms • Installment loan- equal payments over a specified period of time. Usually requires a down payment • Down payment- amount required up front to make the credit deal work- remaining amount will be financed (borrowed on credit) • Usually a percentage or set amount • Consider new law changes on home mortgages • Requirements of 20% down payment on a house • Example: 250,000 dollar house would require a down payment of • $50,000
Key formulas • Amount Financed = Cash Price – Down Payment • Down Payment = Cash Price x Percent Requirement • Example one page 308 • Concept Check 1 and 2, page 308 • 1800 • 3800
Example Two page 309 • Concept check 3 and 4 • $272, $1,088 • $517.50, 1,207.50
Closure • What are the effects of making a larger down payment? • Advantages and Disadvantages • If you can’t afford to pay cash, then………….???? • Purpose of Credit – buy now pay later • 20/10 Rule Says…………….. • Decide how much to finance?
Homework • 5, 7, 9, 11, 13, 15, 17, 19, *21 • Page 309-310
