Thinking Mathematically by Robert Blitzer Thinking Mathematically Consumer

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					  Thinking
Mathematically
Consumer Mathematics and Financial
          Management
          8.5 Installment Buying
The Vocabulary of Fixed Installment
             Loans
Installment loan – a loan that you pay off
  with weekly or monthly payments.
Fixed installment loan – fixed periodic
  payment.
The Vocabulary of Fixed Installment
             Loans
  The amount financed is what the consumer
  borrows:
Amount financed = Cash price - Down payment
The Vocabulary of Fixed Installment
             Loans
  The total installment price is the sum of all
  monthly payments plus the down payment:
Total installment price =
  Total of monthly payments + Down payment
The Vocabulary of Fixed Installment
             Loans
  The finance charge is the interest on the
  installment loan:
Finance charge =
           Total installment price - cash price
   Steps in Using an APR Table
1. Compute the finance charge per $100 financed:
   [Finance charge / (Amount financed/ $100)
2. Look in the row corresponding to the number of
   payments to be made, and find the entry closest
   to the value in step 1.
3. Find the APR a the top of the column in which
   the entry from step 2 is found. (This is the APR
   rounded to the nearest ½%)
Example – Using an APR table
Exercise Set 8.5 #5, 11
   A computer is paid for with 12 monthly installments.
     The finance charge per $100 is $6.90. What is the
     APR for this loan?
   Furniture is purchased for a cash price of $17,500.
     The purchase is financed by paying $500 down, and
     $360.55 per month for 60 months.
      •   Determine the amount financed.
      •   Determine the total installment price.
      •   Determine the finance charge.
      •   What is the APR for this loan?
  Thinking
Mathematically
Consumer Mathematics and Financial
          Management
          8.5 Installment Buying

				
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