Warm UP Problem

• Use graphic calculator or website• What is the monthly payment and finance charge

on the following loan?• $3,500 – NO Down Payment • 12%• 30 months• 135.62 – Monthly Payment• 135.62 x 30 = Amount repaid= 4068.60• 568.60 = 4068.60 – 3500 = Finance Charges

8.4 Installment Loans

Objective: calculate the payment to interest, payment to principal, and

new balance

Key Terms• Repayment Schedule- shows the distribution

of interest and principal over the life of a loanPeriod Interest Principal Balance

1 $583.33 $191.97 $99,808.03

2 $582.21 $193.09 $99,614.95

3 $581.09 $194.21 $99,420.74

4 $579.95 $195.34 $99,225.39

5 $578.81 $196.48 $99,028.91

6 $577.67 $197.63 $98,831.28

7 $576.52 $198.78 $98,632.50

8 $575.36 $199.94 $98,432.55

9 $574.19 $201.11 $98,231.44

10 $573.02 $202.28 $98,029.16

11 $571.84 $203.46 $97,825.70

12 $570.65 $204.65 $97,621.05

13 $569.46 $205.84 $97,415.21

14 $568.26 $207.04 $97,208.16

15 $567.05 $208.25 $96,999.

Paying off a mortgage early!

• http://www.yourmoneypage.com/home/bigloan4a.php

• www.psecu.com-- current rates and calculator• Monthly Payment = Principal + Interest• P and I• P& I

Example One page 316• Follow the steps• Find the interest for the first payment:• I = P x R x T• I = 1800 x .08 x 1/12 = 12• Find P and I = Monthly Payment of 307.08 – 12 = 295.08, where P

is $295.08 and I is $12.• New Principal after first payment 1800 – 295.08 = 1504.92

• Concept check 1– 10.03 ( second months interest)– 297.05 ( second months principal)– 1,207.87 ( new balance at the end of month two)

Example 2, page 317

• Follow Steps• Why is the interest so much less for the 21st

payment?

• Concept check page 317, problem #4– 80– 8000 x .12 x 1/12 = 80– 32.22– 3222.44 x .12 x 1/12 = 32.22

Determine the missing amounts

• Page 318• Monthly Payment = Principle + Interest (P & I)• Problem 5– A. 1,105.44 = Solution: 1200 – 94.56

• Problem 6– A. 28.83, B. 179.12, C. 3,280.88 Solutions:– A. 3460 x .10 x 1/12 = 28.83– B. 207.95 – 28.83 = 179.12– C. 3460 – 179.12 = 3280.88

Closure: How can you save money on an installment loan??

• I= P x R x T• Suggestions• Make larger principal payments• What is the P and I?

Homework page 318

• Complete problems 8- 15• Solution 8• 1435.30 – 198.77= 1236.53• Solution 9• 213.12- 12.37 = 200.75• Solution 10• 1035.78 x .12 x 1/ 12 = 10.36