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Chapter 5 – Loans
Vocabulary Review
1. A way to find interest that uses a 365-day year is the ___________. exact interest method
2. The __________________ tells you how much interest a note is accumulating per day. daily interest factor
3.
4. Interest, fees, and other charges paid on an installment loan or purchase is the ________________. finance charge
5. The true rate of interest on an installment loan is called ________________. annual percentage rate
6. The principal of a loan and the interest on the loan is the ___________. total amount due
7. A financial penalty for paying a loan off early is a(n)________________. prepayment penalty
8.
9. The amount charged for the use of money is called ____________________. interest
10. The amount that is borrowed is called the ___________________. principal
11. The __________________ is the part of the purchase price of an item that is paid at the· take out a loan. down payment
12. When you sign a(n) __________________ _, you are giving a lender a written promise repay the money that you have borrowed. promissory note
5-1 Promissory Notes
1. How much interest will you for a 18-month promissory note that has a
of $3,200 and a rate of 7.875%? $378.00
2. What is the amount due at maturity for the loan in Question 1? $3,578.
3. Phyllis Snow borrowed $3,200 to pay for a new roof. She signed a 6-month promissory note at 12 % interest. Find the amount of interest Phyllis must pay. Then find the amount she must repay to her bank when the note comes
$192; $3,392
4. Oki Saga signed a promissory note for $1,500 at 8% interest for 90 days. Find the interest and amount due she will pay when the note is due using a)ordinary interest and b) exact interest. a) $30, $1,530, b) $29.59, $1,529.59
5. Mohamed Jatmiko paid $420 in interest on a 6-month note for $5,600. Find the rate of interest he paid. 15%
6. Brandon Jones paid $305.25 in interest on a 2-year note for $1,850. Find the rate of interest paid. 8.25%
5·2 Calculating Interest
1. Use the simple interest table to find the exact interest on: a) $470 for 10 days
at 9%; b) $470 for 40 days at 10%. a) $1.16, b) $5.15
2. What is the daily interest factor for $1,250 borrowed at 13.5% exact interest? $0.4623
3. Find the ordinary interest from March 5 to May 12 on $5,500 at 8% interest. $83.11
4. Find the exact interest from June 13 to August 15 on $6,200 at 9 %. $96.31
5. Find the interest from March 15 to May 31 on $1,900 at 10%. $40.60
5·3 Installment Loans
1. You can buy a DVD player for $250 cash or pay $50 down and the balance in 12 monthly payments of $18. What is the installment price? By what percent would your installment price be greater than the cash price? $266; 6.4%
2. A stove costs $525 on the installment plan. You must make a down payment of $75 and make payments for 15 months. What will be your monthly payments? $30
3. Hector Morales borrowed $2,400 on a one-year simple interest installment
loan at 12 % interest. The monthly payments were $213.24. Find the amount
of interest, amount applied to the principal, and the new balance for the first
monthly payment. $24; $189.24; $2210.76
4. Find the installment price and the finance charge that Harold paid for a $1,200 television because he paid $95 down and $78.85 a month for 18 months. $1,514.30; $314.30
5·4 Early Loan Repayments
1. Terrence Moore has a 4-year, $9,500 car loan at 8%. After paying on the loan for 36 months, he has a balance of $2,666.13. He decides to payoff the loan with the next payment. How much will he have to pay? $2,683.90
2. Gaby Frazier has a l-year, $2,200 loan at 10 %. After paying on the loan for 4 months, Gaby has a balance of $1,490.87. She decides to payoff the loan with the next payment. How much will she have to pay? $1,503.29
3. Penn Peloko borrowed $10,500 at 8.5% for 5 years. His monthly payment was $215.42. Penn did not payoff the loan early. How much did he pay back to the lender? $12,925.20
5·5 Annual Percentage Rates
1. Maria Medina borrowed $400 on a 12-month loan with a finance charge of $39. Find the finance charge per $100 of the amount financed and the annual percentage rate. $9.75, 17 ½%
2. Find the annual percentage rate for a loan with a finance charge of $6.25 per $100 for 9 payments. 14 ¾%
3. Calida repaid a loan of $2,100 in 15 monthly installments of $152.40 each. Find the APR on her loan. 7.1%
4. Find the annual percentage rate for a loan with a finance charge of $40.20 per $500 for 12 payments. 14;%
5. Pedro repaid a loan $3,900 in 15 monthly installments of $284 each. Find the APR on his loan. 13 ½%