chap08

What You’ll Learn
Section 8-1 Compute the maturity value and

interest rate of a single-payment
loan.
Section 8-2 Calculate the amount financed on
an installment loan.
Section 8-3 Figure out the monthly payment,
total amount repaid, and finance
charge on an installment loan.
Section 8-4 Work out the payment to interest,
payment to principal, and the new
balance.
Section 8-5 Compute the final payment of a
simple interest installment loan.
Section 8-6 Use a table to find the annual
percentage rate of a loan.
When Will You Ever Use This?
Some day you might want to earn a college
degree, buy a car, or purchase a home. Taking
out a loan is a common way to borrow the
money now and repay it later.
Key Words to Know

• single-payment • down payment
loan • amount financed
• promissory note • simple interest To learn more about loans,
• maturity value installment loan
• term • annual percentage visit busmath.glencoe.com.
• ordinary interest rate
• exact interest • repayment schedule
• installment loan • final payment
282 䊴 Chapter 8 Loans

A Picture-Perfect Loan
Last winter photographer Al Chen hiked in

the Chiricahua Mountains east of Tucson,
Arizona. The area is not as high as many
mountain ranges in North America (the
summit of Chiricahua Peak is 9,795 feet
above sea level). Chen hopes to return
and tackle another week of camping and
photography. He has four months before
his trip and he knows he can’t save
enough money to pay for the equipment
he wants. In this chapter learn how Chen
contemplates taking out a small loan to
afford a trip.
Read on. Go to . . .
When Your Dad Doesn’t Have
Deep Pockets . . . . . . . . . . . . . .p. 284
A Little Fatherly Advice . . . . . . . . .p. 287
A Model for Improvement . . . . . . . .p. 290
It’s Payback Time . . . . . . . . . . . . .p. 294
You Need a Plan . . . . . . . . . . . . . .p. 297
How Much Are Your

Dreams Worth? . . . . . . . . . . . . .p. 300
Analyze the Story . . . . . . . . . . . . .p. 305
283
Single-Payment Loans
A single-payment loan is a loan that you repay with one payment after a
specified period of time. A promissory note is a type of single-payment loan.
Compute the It is a written promise to pay a certain sum of money on a certain date in the
maturity value and future. The maturity value of the loan is the total amount you must repay. It
interest rate of a includes both the principal and the interest owed. To review Chapter 5 content
single-payment remember that principal is the amount borrowed.
loan. You’ll need to know the term of a loan. This is the amount of time for which
the loan is granted. For example, a single-payment loan may be granted for a
number of years, months, or days. When the term is a certain number of days, the
lending agency may calculate interest in one of two ways: (1) ordinary interest
or (2) exact interest . Here is an explanation on both kinds of interest:
• ordinary interest is calculated by basing the time of the loan on a 360-day year.
• exact interest is calculated by basing the time of the loan on a 365-day year.
Ask yourself these questions as you work through the problems:
Important What Formulas

Questions Do I Use?
How do I calculate interest? Interest Principal Rate Time
Then ask yourself . . .
what do I need to find— Ordinary Interest Principal Rate Time 360
ordinary interest or Exact Interest Principal Rate Time 365
exact interest?
How do I calculate
Maturity Value Principal Interest Owed
maturity value?
When Your Dad Doesn’t Have Deep Pockets Chen’s friend

Liz was the one who suggested taking out a loan. He’d never
borrowed money from a bank before. Liz tells him that he can
take out the loan and then sell his photos from the trip to help
pay back the loan. Chen decides to look into the possibility of
getting a loan for his trip.
Draw Conclusions How might a loan from Chen’s dad be
different than a loan from a bank?
Continued on page 287

Example 1
Anita Sloane’s bank granted her a single-payment loan of $7,200 for 91 days at
Workshop 13: 12 percent ordinary interest. What is the maturity value of the loan?
Fractions to STEP 1: Find the ordinary interest owed.
Decimals, Decimals Principal ⴛ Rate ⴛ Time
91
to Percent, page 28 $7,200.00 12% 360 $218.40
Skill 28: Writing STEP 2: Find the maturity value.
Percents as Principal ⴙ Interest Owed
Decimals, page 755 $7,200.00 $218.40 $7,418.40 maturity value
Skill 14: Changing
Fractions/Decimals, 7200 12 91 360
page 741
Application J: 218.4 7418.4
Fractional Parts of
a Year, page 766
CONCEPT CHECK
Complete the problems, then check your answers at the end of the chapter.
1. Compute the ordinary interest and the maturity value.
$600 10% 90 360
2. Compute the ordinary interest and the maturity value.
$800 12% 75 360
Example 2
Suppose Anita Sloane’s bank granted her a single-payment loan of $7,200 for
91 days at 12 percent exact interest. What is the maturity value of the loan?
STEP 1: Find the exact interest owed.
Principal ⴛ Rate ⴛ Time
91
$7,200.00 12% 365 $215.408 or $215.41
STEP 2: Find the maturity value.
Principal ⴙ Interest Owed
$7,200.00 $215.41 $7,415.41 maturity value
CONCEPT CHECK
3. Compute the exact interest and the maturity value.
$600 10% 90 365
4. Compute the exact interest and the maturity value.
$800 12% 75 365
S e c t i o n 8 - 1 Sing le-Pay me nt Lo ans 䊳 285

SECTION 8-1 PRACTICE
Interest Rates Maturity

Principal Term Interest
Ordinary Exact Value
5. $ 900 4% — 45 a. b.
6. 1,960 — 6% 30 a. b.
7. 3,450 5% — 72 a. b.
8. 730 — 5% 75 a. b.
9. 4,800 10% — 123 a. b.
10. 9,675 — 9% 275 a. b.
11. Maria Rodriquez. 12. Manuel Bruins.

Single-payment loan of $1,000. Single-payment loan of $8,400.
Interest rate of 7 percent. Interest rate of 12 percent.
Ordinary interest for 108 days. Exact interest for 146 days.
a. What is the interest owed? a. What is the interest owed?
b. What is the maturity value? b. What is the maturity value?
13. Joseph Henning borrowed $24,000 for new computers for his software
production company. His bank granted him a single-payment loan of
$24,000 for 144 days at an ordinary interest rate of 9 percent. What is the
maturity value of his loan?
14. Vanessa Tackett borrowed $21,000 for new lawn care equipment for her
landscape business. The bank granted her a single-payment loan of $21,000
for 45 days at an ordinary interest rate of 10 percent. What is the maturity
value of her loan?
15. Jessie Ardella obtained a single-payment loan of $3,225.00 to pay a repair
bill. He agreed to repay the loan in 31 days at an exact interest rate of
11.75 percent. What is the maturity value of his loan?
16. Suppose your bank has a minimum loan charge of $48 when you borrow at
6 percent ordinary interest for 90 days. What principal borrowed will result
in a $48 interest charge?
MAINTAINING YOUR SKILLS
Write the percents as decimals.

Skill 28: Writing 17. 40% 18. 90.5% 19. 7%
Percents as
Decimals, page 755 Reduce the fractions to lowest terms.
Skill 12: Equivalent 20. 60
40 180
21. 360
90
22. 360
Fractions, page 739
Skill 14: Changing Change the fractions to decimals. Round to the nearest thousandth.
Fractions/Decimals, 40 45 126
23. 60 24. 360 25. 360
page 741

Installment Loans
An installment loan is a loan that you repay in several equal payments over a
specified period of time. Usually when you purchase an item with an installment
Calculate the loan, you must make a down payment. The down payment is a portion of the
amount financed cash price of the item you are purchasing. The amount financed is the portion
on an installment of the cash price that you owe after making the down payment.
loan. Ask yourself these questions as you work through the problems:

Questions Do I Use?
How do I calculate the
Amount Financed Cash Price Down Payment
amount financed?
How do I find the
Down Payment Amount Percent
down payment?
A Little Fatherly Advice Chen tells his father about his dream
to return to the rugged Chiricahua Mountains and photograph
them for his freelance photography business. He mentions he
won’t be able to save enough money by February so he wants to
take out a loan from a bank.
Mr. Chen thinks this is a great idea because it’ll teach Chen
financial responsibility, and require him to start paying the
money back in installments (as opposed to whenever he feels
like it).
Draw Conclusions Mr. Chen explains that taking out a loan is
certainly possible but that there are restrictions on the amount
of money Chen can borrow. Before the bank will give Chen a
loan, what does he have to do first?
Workshop 14:
Finding a
Percentage, page 30
Example 1
Workshop 13:
Fractions to Tasheka Quintero is buying a new refrigerator for $1,399. Quintero made
Decimals, Decimals a down payment of $199 and financed the remainder. How much did
to Percents, page 28 Quintero finance?
Workshop 2: STEP: Find the amount financed.
Rounding Numbers, Cash Price ⴚ Down Payment
page 6 $1,399 $199 $1,200 financed
Application A:
Formulas, page 760
S e c t i o n 8 - 2 Installme nt Lo ans 䊳 287

CONCEPT CHECK
Determine the amount financed.
1. Big-screen television set. 2. Office computer.
Cash price of $1,999.99. Cash price of $3,950.
Down payment of $199.99. Down payment of $150.
Example 2
Rebecca Clay purchased a washer and a dryer for $1,140. She used the store’s
installment credit plan to pay for the items. She made a down payment and
financed the remaining amount. What amount did she finance if she made
a 20 percent down payment?
STEP 1: Find the 20 percent down payment.
$1,140 20% $228
STEP 2: Find the amount financed.
Cash Price ⴚ Down Payment
$1,140 $228 $912 financed
1140 20 228 912
CONCEPT CHECK
Find the down payment and the amount financed.
3. Waterbed. 4. Television set.
Cash price of $1,360. Cash price of $725.
Twenty percent down payment. Thirty percent down payment.
Cash Down Payment Down Payment Amount

Price (Cash) (Percent) (in Dollars) Financed
5. $ 640 $ 120 — a. b.
6. 4,860 1,400 — a. b.
7. 9,774 1,500 — a. b.
8. 3,600 — 40% a. b.
9. 9,480 — 15% a. b.
10. 5,364 — 25% a. b.

11. Cash price of $1,265. 12. Cash price of $14,470.
Down payment of $100. Down payment of $3,000.
What amount is financed? What amount is financed?
What influences
your credit rating? 13. Cash price of $8,371.39. 14. Cash price of $18,936.50.
Timely payments Down payment of 15 percent. Down payment of 30 percent.
and the amount What amount is financed? What amount is financed?
of debt you’re
carrying affect it. 15. Milt Gibson purchased computer equipment for $4,020. He used the
store’s credit plan. He made a 20 percent down payment. What amount
did he finance?
16. Linda Chevez purchased a stereo for her car. The stereo cost $279.50. Using
the store’s credit plan, she made a $50.00 down payment. What amount did
she finance?
17. Ardella Haubert purchased living room furniture for $3,987.95. She made a
down payment of 20 percent and financed the remaining amount using the
store’s installment plan. What amount did she finance?
18. Bev and Tom Hoffman went on a two-week vacation at a total cost of $2,876.
They financed the trip through State Bank. They made a 25 percent down
payment and financed the remaining amount on the installment plan. What
amount did they finance?
19. Amy and Cliff Martin want to remodel their kitchen. They would like to
finance part of the cost but do not want the amount financed to be more
than $9,000. The total cost of remodeling the kitchen is $12,000. What
percent of the total cost should their down payment be?
20. Mack Casey wants to purchase a car costing $14,590. He will finance the car
with an installment loan from the bank but would like to finance no more
than $10,000. What percent of the total cost of the car should his down
payment be?
Write the percents as decimals.

Skill 28: Writing
21. 32% 22. 45% 23. 25%
Percents as
Decimals, page 755
Find the percentage.
Skill 30: Finding
the Percentage, 24. 440 30% 25. 325 20% 26. 1,240 25%
page 757
Skill 2: Rounding Round to the nearest cent.
Numbers, page 729
27. $49.9638 28. $178.3813 29. $413.995
S e c t i o n 8 - 2 Installme nt Lo ans 䊳 289

Simple Interest
Installment Loans
Figure out the When you obtain a simple interest installment loan , you must pay finance
monthly payment, charges for the use of the money. You repay the loan with equal monthly payments,
total amount where part of each payment is used to pay the interest on the unpaid balance of the
repaid, and loan. And the remaining part of the payment is used to reduce the balance.
finance charge Usually you repay the amount financed plus the finance charge in equal
on an installment monthly payments. The amount of each monthly payment depends on the
loan. amount financed, the number of payments, and the annual percentage rate
(APR). The annual percentage rate is an index showing the relative cost of
borrowing money.

Questions Do I Use?
How do I find the Amount of Loan Monthly Payment for
Monthly Payment —
monthly payment? $100 a $100 Loan
How do I calculate the
total amount paid? Total Amount Repaid Number of Payments Monthly Payments
How do I find the
Finance Charge Total Amount Repaid Amount Financed
finance charge?
A Model for Improvement Mr. Chen uses a home remodeling

loan as a model for his son. “It’s important to understand that
with a simple interest installment loan, you’ll be paying back
the amount you borrow plus finance charges each month,”
Mr. Chen says.
Draw Conclusions What do you think a bank looks for in a
client who wants to take out a personal loan?
Example 1
Clara Hart obtained an installment loan of $1,800.00 to purchase some new
furniture. The annual percentage rate is 8 percent. She must repay the loan
in 18 months. What is the finance charge?

STEP 1: Find the monthly payment. (Refer to the Monthly Payment on a
Workshop 6: Simple Interest Installment Loan of $100 table on page 799.)
Multiplying Amount of Loan Monthly Payment
$100 ⴛ for a $100 Loan
Decimals, page 14
Workshop 5: $1800.00 $5.91 $106.38
Subtracting
$100.00
Decimals, page 12 STEP 2: Find the total amount repaid.
Workshop 18: Number of Payments ⴛ Monthly Payment
Reading Tables and 18 $106.38 $1,914.84
Charts, page 38 STEP 3: Find the finance charge.
Application C: Total Amount Repaid ⴚ Amount Financed
Tables and Charts, $1,914.84 $1,800.00 $114.84 finance charge
page 762
1800 100 5.91 106.38 18
1914.84 1800 114.84
CONCEPT CHECK
Complete the problem, then check your answers at the end of the chapter.
1. Find the monthly payment, total amount repaid, and the finance charge for a
$1,600.00 installment loan at 10 percent for 24 months.
Example 2
Tulio and Lupe Fernandez are purchasing a side-by-side refrigerator with
an installment loan that has an APR of 12 percent. The refrigerator sells for
$1,399.99. The store financing requires a 10 percent down payment and
12 monthly payments. What is the finance charge?
STEP 1: Find the amount financed.
Selling Price ⴚ Down Payment
$1,399.99 (0.10 $1,399.99)
$1,399.99 $140.00 $1,259.99
STEP 2: Find the monthly payment. (Refer to the Monthly Payment on a
Simple Interest Installment Loan of $100 table on page 799.)
Amount of Loan Monthly Payment
$100 ⴛ for a $100 Loan
$1259.99 $8.88
$100.00
$111.887 or $111.89 monthly payment
STEP 3: Find the total amount repaid.
Number of Payments ⴛ Monthly Payment
12 $111.89 $1,342.68
STEP 4: Find the finance charge.
Total Amount Repaid ⴚ Amount Financed
$1,342.68 $1,259.99 $82.69 finance charge
S e c t i o n 8 - 3 Simple Interest Installme nt Lo ans 䊳 291

CONCEPT CHECK
2. Find the down payment, amount financed, monthly payment, total amount
repaid, and the finance charge for a $4,000.00 used boat, with a 20 percent
down payment and an installment loan at an APR of 10 percent interest for
36 months.
Use the Monthly Payment on a Simple Interest Installment Loan of $100 table
on page 799 to solve the following.
Term Table Amount Monthly Total Finance

APR
(Months) Value Financed Payment Repaid Charge
3. 10% 6 a. $1,000 b. c. d.
4. 12% 18 a. 2,000 b. c. d.
5. 8% 24 a. 5,600 b. c. d.
6. 9% 30 a. 9,900 b. c. d.
7. 8% 36 a. 9,550 b. c. d.
8. Hazel Basnett. 9. Brian Anderson.

Installment loan of $2,000. Installment loan of $1,250.
Requires 12 monthly payments. Requires 24 monthly payments.
APR is 8 percent. APR is 10 percent.
a. What are the monthly payments? a. What are the monthly payments?
b. What is the finance charge? b. What is the finance charge?
10. Used boat loan for $12,000. 11. Equipment loan for $20,000.
Down payment of 25 percent. Down payment of 20 percent.
A 9 percent APR for 36 months. A 12 percent APR for 30 months.
a. What is the down payment? a. What is the down payment?
b. What is the amount of the loan? b. What is the amount of the loan?
c. What are the monthly payments? c. What are the monthly payments?
d. What is the finance charge? d. What is the finance charge?
12. Bob Wozniak obtained an installment loan of $2,400 to put a new roof on his
house. The APR is 12 percent. The loan is to be repaid in 36 monthly payments.
(You may need to refer to the Monthly Payment on a Simple Interest
Installment Loan of $100 table on page 799.) What is the finance charge?
13. Jim Wilson obtained an installment loan of $1,450 to pay for some new
furniture. He agreed to repay the loan in 18 monthly payments at an APR
of 8 percent. What is the finance charge?

14. Mark and Pam Voss obtained an installment loan of $2,460. The APR is
9 percent for 12 monthly payments. What is the finance charge?
15. Herb and Marci Rahla are purchasing a dishwasher with an installment loan
that has an APR of 10 percent. The dishwasher sells for $699.95. They agree
to make a down payment of 20 percent and to make 12 monthly payments.
What is the finance charge?
16. Adolfo Ramirez obtained an installment loan of $6,800 for a used car. He
made an $800 down payment. He financed the purchase with a finance
company and agreed to repay the loan in 24 monthly payments at an APR
of 8 percent. What is the finance charge?
17. Aurora Kaylow obtained an installment loan of $6,000 on a used sailboat.

She financed the purchase through the boat dealer and agreed to repay
the loan in 48 monthly payments at an APR of 10 percent. What is the
finance charge?
18. Andrew and Ruth Bacon would like to obtain an installment loan of $1,850
to repair the gutters on their home. They can get the loan at an APR of 8
percent for 24 months or at an APR of 11 percent for 18 months. How much
do the Bacons save by taking the loan with the lowest finance charge?
19. Lola Samaria would like an installment loan of $1,200 for auto repairs.
Walton Savings and Loan will loan her the money at 9 percent for 12
months. Horton Finance Company will loan her the money at 12 percent
for 24 months. How much will she save by taking the loan with the lowest
finance charge?
20. Pauline and Eldon Kharche would like to obtain an installment loan of
$9,800 for replacement windows in their home. They can get the loan at an
APR of 8 percent for 24 months or at an APR of 11 percent for 18 months.
Which loan costs less? How much do the Kharches save by taking the loan
that costs less?
21. Lucretia and Don Protsman would like an installment loan of $12,900.
City Loan will loan the money at 10 percent for 24 months. Economy Line
Finance Company will loan the money at 9 percent for 30 months. Which
loan costs less? How much will be saved by taking the loan that costs less?

Skill 30: Finding
the Percentage, Multiply. Round to the nearest thousandth.
page 757
Skill 20: 22. 4,000.00 100.00 3.33 23. 1,240.00 250.00 5.09
Multiplying
Subtract.
Fractions/Mixed
Numbers, page 747
24. 4,200 25. 1,240 26. 1,224.50
Skill 6: Subtracting
42 15.50 15.31
Decimals, page 733
S e c t i o n 8 - 3 Simple Interest Installme nt Lo ans 䊳 293

Installment Loans—
Allocation of Monthly
Work out the Payment
payment to
interest, payment
As you learned in Section 8-3, a simple interest installment loan is repaid in
to principal, and
equal monthly payments. Part of each payment is used to pay the interest on
the new balance.
the unpaid balance of the loan and the remaining part is used to reduce the
balance. The interest is calculated each month using the simple interest formula.
The amount of principal that you owe decreases with each monthly payment.
A repayment schedule shows the distribution of interest and principal over
the life of the loan. The repayment schedule in Figure 8.1 shows the interest
and principal on an installment loan of $1,800 for 6 months at 8 percent.
Figure 8.1 Repayment Schedule for a $1,800 Loan at 8.0% for 6 Months
Payment Monthly Amount Amount Balance
Number Payment for Interest for Principal $1,800.00 Note that the
1 $307.08 $12.00 $295.08 $1,504.92 last payment
2 307.08 10.03 297.05 1,207.87 would be
3 307.08 8.05 299.03 908.85 reduced by
4 307.08 6.06 301.02 607.82 $0.25 in order
to zero out
5 307.08 4.05 303.03 304.80
the loan.
6 307.08 2.03 305.05 0.25
Important Questions What Formulas Do I Use?

What’s the formula
Interest Principal Rate Time
for interest?
How do I find the
Payment to Principal Monthly Payment Interest
payment to principal?
How do I find the
New Principal Previous Principal Payment to Principal
new principal?
It’s Payback Time Chen reads the bank’s brochure. The

pamphlet contains a chart that shows a repayment schedule for
a $2,000 loan at 6.0 percent interest for 8 months.
Each month you pay proportionately less for interest and more
on your principal as you approach the end of your loan period.
Draw Conclusions Why is it important to get a copy of your
repayment schedule?

Example 1
Stephanie and Donald Cole obtained the loan of $1,800 at 8 percent for 6
Workshop 5: months shown in the repayment schedule in Figure 8.1 on page 294. Show the
Subtracting calculation for the first payment. What is the interest? What is the payment to
Decimals, page 12 principal? What is the new principal?
Workshop 6: STEP 1: Find the interest.
Multiplying Principal ⴛ Rate ⴛ Time
1
Decimals, page 14 $1,800.00 8% 12 $12.00 interest
Workshop 14: STEP 2: Find the payment to principal.
Finding a Monthly Payment ⴚ Interest
Percentage, page 30 $307.08 $12.00 $295.08 payment to principal
Application A:
STEP 3: Find the new principal.
Formulas, page 760
Previous Principal ⴚ Payment to Principal
$1,800.00 $295.08 $1,504.92 new
principal
CONCEPT CHECK
1
1. Interest the second month is: $1,504.92 8% 12
2. Payment to principal is: $307.08 ?
3. The new balance is: $1,504.92 ?
Example 2
Carlo Blanco obtained a home improvement loan of $6,000.00 at 8 percent
for 36 months. The monthly payment is $187.80. The balance of the loan after
20 payments is $2,849.08. What is the interest for the first payment? What is
the interest for the 21st payment? Why is the interest so much different for the
two payments?
STEP 1: Find the interest for the first payment.
1
$6,000.00 8% 12 $40.00
STEP 2: Find the interest for the 21st payment.
1
$2,849.08 8% 12 $18.99
The interest is reduced by more than half. The principal is much greater for the
first payment than the second payment.
CONCEPT CHECK
4. You take out a loan of $8,000.00 at 12 percent for 24 months. The monthly
payment is $376.80. The balance of the loan after 15 payments is $3,222.44.
a. What is the interest for the first payment?
b. What is the interest for the 16th payment?
S e c t i o n 8 - 4 Installme nt Lo ans—Allocat ion of Monthly Pay me nt 䊳 295

Loan Interest Monthly Amount Amount New

Balance Rate Payment for Interest for Principal Principal
5. $1,200 12% $106.56 $12.00 $94.56 a.
6. 2,400 8% 141.84 16.00 a. b.
7. 3,460 10% 207.95 a. b. c.
8. 1,011 10% 207.95 a. b. c.
9. 7,200 9% 329.04 a. b. c.
10. 3,599 11% 318.15 a. b. c.
For Problems 11–17, complete the repayment schedule for a loan of $2,400 at
12 percent for 12 months.
Repayment Schedule for a $2,400 Loan

at 12% for 12 Months
Payment Monthly Amount Amount New
Number Payment for Interest for Principal Principal
1 $213.12 $24.00 $189.12 $2,210.88
2 213.12 22.11 191.01 2,019.87
3 213.12 20.20 192.92 1,826.95
4 213.12 18.27 194.85 1,632.10
5 213.12 16.32 196.80 1,435.30
11. 6 213.12 14.35 198.77 a.
12. 7 213.12 12.37 a. b.
13. 8 213.12 a. b. c.
14. 9 213.12 a. b. c.
15. 10 213.12 a. b. c.
16. 11 213.12 a. b. c.
17. 12 a. b. c. d.

Skill 30: Finding
the Percentage,
18. 12% of $5,000 19. 15% of $6,000 20. 8% of $8,400
page 757
21. 22% of $1,282.15 22. 26% of $2,348.90 23. 20% of $456.21
24. 6% of $340.80 25. 15% of $9,845.20 26. 7% of $12,346.97

Paying Off Simple
Interest Installment
Compute the final Loans
payment when
paying off a
When you have a simple interest installment loan, you pay interest on the unpaid
simple interest
balance. If you pay off a simple interest installment loan before the end of the
installment loan.
term, you just pay the previous balance plus the current month’s interest. This
is the final payment .
One reason to pay off a simple interest installment loan before the end of
the term is to pay less interest. The amount of interest saved depends on the
total payback minus the sum of the previous payments and the final payment.

Questions Do I Use?
How do I calculate
Interest Principal Rate Time
interest?
How do I find the
Final Payment Previous Balance Current Month‘s Interest
final payment?
How do I determine the (Sum of Previous Payments
Interest Saved Total Payback
interest saved? Final Payment)
You Need a Plan Chen thinks he could pay off this loan early
if he sells some of his photographs from his trip as soon as he
gets back.
Mr. Chen smiles, “Make sure you talk with the loan officer
about that possibility. The bank will explain how a payoff works.
Generally, the bank still gets some interest on the loan on the
final payoff.”
Draw Conclusions Why might a bank not encourage you to
pay off a loan early?
Example 1
The first 3 months of the repayment schedule for Doug and Donna Collins’s
loan of $1,800 at 12 percent interest for 6 months is shown in Figure 8.2 on page
298. What is the final payment if they pay the loan off with the fourth payment?
Continued on next page
S e c t i o n 8 - 5 Pay in g O f f S i m p l e Int e re s t Ins t a l l m e n t Lo a n s 䊳 297

Repayment Schedule for a $1,800 Loan
Figure 8.2 at 12.0% for 6 Months
Payment Monthly Amount Amount Balance
Number Payment for Interest for Principal $1,800.00
1 $310.50 $18.00 $292.50 $1,507.50
2 310.50 15.08 295.42 1,212.08
Workshop 4: 3 310.50 12.12 298.38 913.70
Adding Decimals,
page 10 STEP 1: Find the previous balance.
Workshop 5: $913.70.
Subtracting STEP 2: Find the interest for the fourth month.
Decimals, page 12 Principal ⴛ Rate ⴛ Time
Workshop 6: 1
$913.70 12% 12 $9.137 or $9.14
Multiplying
STEP 3: Find the final payment.
Decimals, page 14
Previous Balance ⴙ Current Month’s Interest
Workshop 14:
$913.70 $9.14 $922.84 final
Finding a
payment
Percentage, page 30
CONCEPT CHECK
1. Find the interest for a month and then the final payment for a previous
balance of $800 at 10 percent interest.
2. You have a 12-month loan of $1,200.00 at 12 percent interest with a balance
of $816.04 after the fourth payment. What is the final payment if you pay off
the loan with the fifth payment?
Example 2
How much would the Collinses in Example 1 save by paying off the loan early?
STEP: Find the interest saved.
Total Payback ⴚ (Sum of Previous Payments ⴙ Final Payment)
(6 $310.50 ) [( 3 $310.50 ) $922.84]
$1,863.00 [$931.50 $922.84]
$1,863.00 $1,854.34
$8.66 saved
CONCEPT CHECK
Complete the problem, then check your answer at the end of the chapter.
3. In Problem 2 you had a 12-month loan of $1,200.00 at 12 percent interest
with a balance of $816.04 after the fourth payment of $106.56. How much
do you save by paying off the loan with the fifth payment?

Find the interest and the final payment.
Interest Previous Final

Interest
Rate Balance Payment
4. 12% $4,800.00 a. b.
5. 8% 3,000.00 a. b.
6. 10% 1,460.80 a. b.
7. 9% 3,987.60 a. b.
8. 11% 3,265.87 a. b.
9. Willard Hudson took out a simple interest loan of $6,000.00 at 10 percent

interest for 24 months. His monthly payment is $276.60. After 4 payments
the balance is $5,082.21. He pays off the loan when the next payment is due.
What is the interest? What is the final payment? How much is saved by
paying the loan off early?
10. Lillian Hartwick took out a simple interest loan of $3,600.00 at 8 percent
for 12 months with a payment of $313.20. After 6 payments the balance
is $1,835.62. She pays off the loan when the next payment is due. What is
the interest? What is the final payment? How much is saved by paying the
loan off early?
11. Scott DuBois took out a simple interest loan of $1,800.00 for home repairs.
The loan is for 12 months at 8 percent interest with a payment of $156.60.
After 8 months, the balance is $615.87. He pays off the loan when the next
payment is due. What is the final payment? How much is saved by paying
the loan off early?
12. Nicholas and Dorothea Schrodt were looking over the repayment schedule
for their boat loan of $5,500.00 at 15 percent interest for 42 months with a
payment of $168.85. They note the following:
• Balance after payment 18 is $3,493.39.
How much is saved by paying off the loan early at payment 19, 25, and 31?
Multiply.
Skill 8: Multiplying
Decimals, page 735 13. 5,489 0.15 14. 2,729 0.22 15. 9,032 0.18
Skill 30: Finding
the Percentage,
page 757
16. 430 18% 17. 3,561.90 9% 18. $10,907.45 15%
S e c t i o n 8 - 5 Pay i n g O f f S i m p l e In t e re s t In s t a l l m e n t Lo a n s 䊳 299
Determining the APR
If you know the number of monthly payments and the finance charge per $100
of the amount financed, you can use a table to find the annual percentage rate
Use a table to find (APR) of the loan. You can use the APR of loans to compare the relative cost
the annual percentage of borrowing money.
rate of a loan.
Annual Percentage Rate for Monthly Payment Plans
Figure 8.3 Annual Percentage Rate

10.00% 10.25% 10.50% 10.75% 11.00% 11.25% 11.50% 11.75% 12.00% 12.25% 12.50%
Term Finance Charge per $100 of Amount Financed
6 $ 2.94 $ 3.01 $ 3.08 $ 3.16 $ 3.23 $ 3.31 $ 3.38 $ 3.45 $ 3.53 $ 3.60 $ 3.68
12 5.50 5.64 5.78 5.92 6.06 6.20 6.34 6.48 6.62 6.76 6.90
18 8.10 8.31 8.52 8.73 8.93 9.14 9.35 9.56 9.77 9.98 10.19
24 10.75 11.02 11.30 11.58 11.86 12.14 12.42 12.70 12.98 13.26 13.54
Note: An expanded table can be found in the Appendix on pages 794–795.
As you work through the problems, you will need this important formula:
Finance Charge
Finance Charge per $100 ⴝ $100 ⴛ
Amount Financed
How Much Are Your Dreams Worth? Still studying the

brochure, Chen finds one chart that shows the annual
percentage rates (APR) of the home improvement loan Chen’s
parents borrowed. The chart shows various finance charges
per $100 borrowed. The figures vary according to the length
of the loan and the annual percentage rate of the loan. He
figures out the APR and term of loan that will suit his needs
best, and tomorrow he’ll talk with the bank’s loan officer to
negotiate a loan.
Draw Conclusions Given Chen’s situation, do you think it’s a
good idea to take out a loan for a vacation? Or should he wait
and save up money in order to afford the trip?
Example 1
Paul Norris obtained an installment loan of $1,500.00 to pay for a computer.
The finance charge is $146.25. He agreed to repay the loan in 18 monthly
payments. What is the annual percentage rate?

STEP 1: Find the finance charge per $100.
Finance Charge
Workshop 7: $100 ⴛ
Dividing Decimals,
Amount Financed
$146.25
page 16 $100
$1,500.00
Workshop 2:
$100 0.0975 $9.75
Rounding Numbers,
page 6 STEP 2: Find the APR. (Refer to Figure 8.3, the Annual Percentage Rate for
Skill 11: Dividing Monthly Payment Plans table on page 300.)
Decimals, page 738 In the row for 18 payments, find the number closest to $9.75. It is
Skill 2: Rounding $9.77. Read the APR at the top of the column. APR is 12.00 percent.
Numbers, page 729
CONCEPT CHECK
Find the finance charge per $100 and the APR.
1. A 6-month loan.
Finance charge: $24.64.
Amount financed of $800.
2. A 24-month loan.
Finance charge: $96.22.
Amount financed of $850.
Example 2
A 54-inch HDTV is for sale for $1,899.92 cash or $166.10 per month for 12
months. What is the APR?
Total Payback ⴚ Amount Financed
(12 $166.10) $1,899.92
$1,993.20 $1,899.92 $93.28
Finance Charge
$100 ⴛ
Amount Financed
$ 93.28
$100
$1,899.92
$100 0.04909 $4.91
STEP 3: Find the APR. (Refer to the Annual Percentage Rate for Monthly
Payment Plans table on pages 794–795.)
In the row of 12 payments, find the number closest to $4.91. It is
$4.94. Read the APR at the top of the column. APR is 9.00 percent.
CONCEPT CHECK
Complete the problem, then check your answer at the end of the chapter.
3. A home improvement loan of $4,000.00 has payments of $186.00 per month
for 24 months. What is the APR?
S e c t i o n 8 - 6 D e ter mining the A PR 䊳 301

Complete the table. Using the Annual Percentage Rate for Monthly Payment
Plans table on pages 794–795, find the finance charge per $100 and the APR.
Finance Amount Finance Charge Number of Annual

Charge Financed per $100 Payments Percentage Rate
4. $ 33.10 $1,000 a. 6 b.
5. 159.36 2,400 a. 24 b.
6. 108.00 3,000 a. 18 b.
7. 691.74 5,400 a. 36 b.
8. 597.66 4,200 a. 30 b.
9. Ed Naiman.
Installment loan of $2,500.00.
Finance charge of $193.25.
Requires 24 monthly payments.
What is the APR?
10. Betty Arca.
Installment loan of $800.00.
Finance charge of $40.72.
Requires 36 monthly payments.
What is the APR?
11. Webster Larkin.
Installment loan of $3,000.00.
Requires 6 monthly payments of $511.18.
What is the APR?
12. Kenneth Bryant.
Installment loan of $9,365.
Requires 36 monthly payments of $284.90.
What is the APR?
13. Marie Brenson obtained an installment loan of $460.00 to purchase
computer software. The finance charge is $7.41. She agreed to repay the
loan in 6 monthly payments. What is the APR rate?
14. Herb Stanley acquired an installment loan of $6,800.00 to pay his daughter’s
college tuition. The finance charge is $731. He agreed to repay the loan in
24 monthly payments. What is the APR?
15. Jeff Stapleton acquired an installment loan of $1,995.00 to pay for truck
transmission repairs. He agreed to repay the loan in 12 monthly payments
of $174.70. What is the APR?
16. Julia Bourne obtained an installment loan of $3,800.00 to purchase a lawn
and garden tractor. She agreed to repay the loan in 24 monthly payments
of $167.15. What is the APR?
17. Oneta Correy wants to obtain an installment loan of $9,900.00 to purchase
a used truck. The bank has agreed to loan her the money for 24 months
at $439.89 per month. What is the APR of her loan?

18. Helen Olson needs an installment loan of $999.00 to purchase a power
washer from a paint store. She must repay the loan in 24 months. The
monthly payment is $44.96. What is the APR of her loan?
19. Brent and Lola Miller are buying a washer that costs $399.95 and a dryer that
costs $249.99. To use the store’s installment plan, they need a down payment
of $49.94. They must make 18 monthly payments of $37.08 each. What is the
APR on their installment loan?
20. Jorge Holland is having a new furnace installed. The furnace costs $3,500.00.
The bank requires a down payment of 20 percent and 36 monthly payments
of $85.18 each. What is the APR on his loan?
21. Ty Chin is buying a new 32-inch television set that costs $599.99 plus
6 percent sales tax. To use the installment plan available at the electronics
store, he must make a down payment of 25 percent and make 30 monthly
payments of $17.00 each. What is the APR on his loan?
22. Chef Andrew Stachowick is buying a gas range. He would like an installment
loan of $5,000 to be repaid in 36 months. Nathaniel Loan Company will
grant the loan with a finance charge of $893.00. City Finance Company
will grant the loan with a finance charge of $935.50. What is the APR on
each loan?
23. Wayne Charles is financing the replacement of kitchen cupboards with
an installment loan of $8,000 to be repaid in 24 months. ABC Finance
Company will grant the loan with a finance charge of $881.60. Atco Financial
Service will grant the loan with a finance charge of $904.00. What is the APR
on each loan?
24. Eleanor Penny had a $1,987.00 water softener installed. She made a down
payment of $87.00. She can finance the remainder through the dealer at
$169.00 a month for 12 months. She could also obtain a credit union loan
at $114.19 per month for 18 months. Find the following for each loan: the
finance charge, the APR, and the total amount paid. Which payment plan
is the best deal? Why?
25. Kathleen Dunn purchased a laptop computer for $1,200.00. She made a
down payment of $500.00. She can finance the remainder by agreeing to pay
$31.34 per month for 24 months to the computer company. She could also
obtain a small business loan at $40.44 per month for 18 months. Find the
following for each loan: the finance charge, the APR, and the total amount
paid. Which payment plan is the best deal?

Skill 2: Rounding
Round to the nearest cent.
Numbers, page 729
Skill 10: Dividing 26. $19.439 27. $12.4162 28. $40.3072
(Decimal
Divide. Round answers to the nearest hundredth.
Remainder),
page 737 29. 510 17 30. 1,060 24 31. 2,642 47
Skill 11: Dividing
Decimals, page 738
S e c t i o n 8 - 6 D e ter mining the A PR 䊳 303

8
CONCEPT CHECK (p. 285)
1. $15, $615 2. $20, $820
3. $14.79, $614.79 4. $19.73, $819.73

1. $1,999.99 $199.99 $1,800 2. $3,950 $150 $3,800
3. $1,360 0.20 $272; 4. $725 0.30 $217.50;
$1,360 $272 $1,088 $725 $217.50 $507.50
CONCEPT CHECK (p. 291, 292)

1. Monthly Payment: ($1,600.00 $100.00) $4.61 $73.76
Total Repaid: 24 73.76 $1,770.24
Finance Charge: $1,770.24 $1,600.00 $170.24
2. Down Payment: $4,000.00 ($4,000.00 0.20) $800.00
Amount Financed: $4,000.00 $800.00 $3,200.00
Monthly Payment: ($3,200.00 $100.00) $3.23 $103.36
Total Repaid: 36 103.36 $3,720.96
Finance Charge: $3,720.96 $3,200.00 $520.96

1. $10.03 2. $297.05
1
3. $1,207.87 4. a. $8,000 0.12 —
12 $80.00
1
b. $3,222.44 0.12 —
12 $32.22

1
1. $800 0.10 —
12 $6.67; $800 $6.67 $806.67
1
2. $816.04 0.12 —12 $8.16; $816.04 $8.16 $824.20
3. (12 $106.56) [(4 $106.56) $824.20]
$1,278.72 [$425.24 $824.20]
$1,278.72 $1,250.24 $28.28

1. 24.64
$100 $3.08
800
APR 10.5%
2. 96.22
$100 $11.32
850
APR 10.5%
3. Finance charge (24 $186) $4,000 $4,464 $4,000 $464
Finance charge per $100 $100 ($464 $4,000) $11.60
Row for 24 payments, number closest to $11.60 is $11.58.
The APR is 10.75%.

8
Analyze the Story As Chen found out, dreams do have a price tag
attached. Depending on whether or not you’re willing to save or get
a loan, you’ll need to contemplate the type of loan to take out.
Negotiating to Arrive at a Decision What are you willing to take
out a loan for?
a. Create a list of expensive items that you might need a loan for in
the future. Pick one to pursue.
b. Use the Internet to find out about your item’s expense. Find out
how much you’d need to spend in order to get it.
c. On a sheet of paper, estimate how long it might take if you took out
a loan like Chen was looking at. (See Section 8-4 on page 294.)
d. Discuss with classmates if the item is worth taking out a loan and
paying interest on over a number of years.
e. Put together a pro and con list after openly talking with your
friends. Make a decision about purchasing the item in the future.
REVIEW OF KEY WORDS

single-payment loan (p. 284) exact interest (p. 284) simple interest installment loan
promissory note (p. 284) installment loan (p. 287) (p. 290)
maturity value (p. 284) annual percentage rate (p. 290) repayment schedule (p. 294)
term (p. 284) down payment (p. 287) final payment (p. 297)
ordinary interest (p. 284) amount financed (p. 287)
Determine if the following statements are true or false.
1. A loan is money that you have borrowed and 7. The formula for the amount financed is
must repay. the cash price plus the exact interest.
2. A single-payment loan is a loan for which 8. For a simple interest installment loan, you
you pay a portion of the loan and a portion usually repay the amount financed plus the
of the interest in several installments. finance charge in equal monthly payments.
3. The total amount of money you repay is 9. The annual percentage rate is interest
called the maturity value. calculated by basing the time of the loan
4. The term of the loan is the amount borrowed. on a 31-day month.
5. Ordinary interest is calculated by basing the 10. A repayment schedule shows a plan to
time on a 365-day year. distribute interest and principal over the
6. The down payment is a portion of the cash life of the loan.
price of the item you are purchasing.
St udy Guide and Ass essme nt 䊳 305

8
SECTION OBJECTIVE 8-1 AND EXAMPLES
Compute the maturity value and interest rate of a single-payment loan.

Ricardo Lopez’s bank granted him a single-payment loan of $3,500 for 80 days
at 11 percent ordinary interest. What is the maturity value of the loan?
STEP 1: Find the ordinary interest. STEP 2: Find the maturity value.
Principal ⴛ Rate ⴛ Time Principal ⴙ Interest Owed
$3,500 11% –– 80
360 $3,500 + $85.56
$85.56 = $3,585.56 maturity value
REVIEW EXERCISES
11. Dee Thomas obtained a single-payment 12. Bert Burruezo obtained a single-payment
loan of $21,400 to purchase a diamond loan from University Bank for $6,000. He
necklace and bracelet set. She agreed to agreed to repay the loan in 60 days at an
repay the loan in 120 days at an ordinary exact interest rate of 6 percent. What is the
interest rate of 8.5 percent. What is the maturity value of his loan?
maturity value of her loan?
Interest Rates Maturity
Principal Term Interest
Ordinary Exact Value
13. $1,540 — 5% 60 a. b.
14. 2,500 5% — 72 a. b.
Calculate the amount financed on an installment loan.

Theresa Traurig is buying a new copy machine for $635.88. She made a down payment
of 15 percent and will finance the remainder. How much did Traurig finance?
STEP 1: Find the down payment. STEP 2: Find the amount financed.
$635.88 15% Cash Price ⴚ Down Payment
$95.38 $635.88 $95.38
$540.50 financed
REVIEW EXERCISES
15. Daleen Aragon purchased a DVD player 16. Levi Lemke wants to purchase a car costing
and speaker system for her home. The $21,000. He will finance the car with an
total cost of her purchases was $587.33. installment loan from the bank, but he
Using the store’s credit plan, she made would like to finance no more than $14,280.
a $147.00 down payment. What amount What percent of the total cost of the car
did she finance? should his down payment be?

8
REVIEW EXERCISES (continued)
Cash Down Payment Down Payment Amount
Price (Cash) (Percent) (in Dollars) Financed
17. $ 789 $300 — a. b.

18. 4,500 — 25% a. b.
Figure out the monthly payment, total amount repaid, and finance charge on
an installment loan.
Andria Berger obtained an installment loan of $2,200 to purchase a fence for
her home. The annual percentage rate is 10 percent. She must repay the loan in
24 months. What is the finance charge?
STEP 1: Find the monthly payment. (Refer to the Monthly Payment on
a Simple Interest Installment Loan of $100 table on page 799.)
Amount of Loan Monthly Payment
$100 ⴛ for a $100 loan
$2,200.00 $4.61 $101.42
$100.00
STEP 2: Find the total amount repaid.
Number of Payments ⴛ Monthly Payment
24 $101.42 $2,434.08
Total Amount Repaid ⴚ Amount Financed
$2,434.08 $2,200.00 $234.08 finance charge
REVIEW EXERCISES
For these problems, you might need to refer 20. Rick and Annette Evans purchased a
to the Monthly Payment on a Simple Interest new living room set at Allied Furniture
Installment Loan of $100 table on page 799. Store for $2,896.00. They agreed to
19. James Proctor obtained an installment loan make a down payment of 20 percent
of $3,500 to have some trees removed from and finance the remainder for 12 monthly
his yard. The APR is 12 percent. The loan payments. The APR is 8 percent. What is
is to be repaid in 30 months. What is the the finance charge?
finance charge?
Term Table Amount Monthly Total Finance

APR
(Months) Value Financed Payment Repaid Charge
21. 8% 6 a. $1,500 b. c. d.
22. 10% 6 a. 2,300 b. c. d.

8
Work out the payment to interest, payment to principal, and the new balance.
Jorge Ortega obtained a loan of $2,800.00 at 8 percent for 1 year. The monthly
payment was $243.60. For the first payment, what is the interest? What is the
payment to principal? What is the new principal?
STEP 1: Find the interest.
1
$2,800.00 8% 12 $18.67 interest
STEP 2: Find the payment to principal.
Monthly Payment ⴚ Interest
$243.60 $18.67 $224.93 payment to principal
STEP 3: Find the new principal.
Previous Principal ⴚ Payment to Principal
$2,800.00 $224.93 $2,575.07 new principal
REVIEW EXERCISES
Loan Interest Monthly Amount Amount New
Balance Rate Payment for Interest for Principal Principal
23. $3,900 12% $303.55 a. b. c.

24. 1,800 9% 114.48 a. b. c.
25. 1,300 8% 105.43 a. b. c.
26. 2,600 10% 189.45 a. b. c.
27. Daniel Orrange obtained an installment 28. Bill Nanz obtained a loan for porch
loan of $8,500 at 14 percent for 42 months. furniture. The loan is for $2,500 at 12.5
The balance of the loan after 26 payments percent. The monthly payment is $118.23.
is $3,733.55. What is the interest for What is the interest for the first payment?
payment 27? What is the payment to principal? What is
the new principal?
Compute the final payment when paying off a simple interest installment loan.
You have a 6-month loan of $1,000.00 at 10 percent with a balance of $338.89 after
payment 4. What is the final payment if you pay off the loan with payment 5?
STEP 1: Find the previous balance.
$338.89

8
STEP 2: Find the interest for the fifth month.
1
$338.89 10% 12 $2.82
STEP 3: Find the final payment.
Previous Balance ⴙ Current Month’s Interest
$338.89 $2.82 $341.71 final payment
REVIEW EXERCISES
Interest Previous Final
Interest
Rate Balance Payment
29. 10% $3,600.00 a. b.

30. 8% 2,400.00 a. b.
31. 12% 4,860.80 a. b.
32. 6% 2,984.50 a. b.
Use a table to find the annual percentage rate of a loan.

Paula Simms obtained an installment loan of $900.00 to purchase a digital
camera to use at work. The finance charge is $13.14. She agreed to repay the
loan in 6 months. What is the annual percentage rate?
Finance Charge
$100 ⴛ
Amount Financed
$ 13.14
$100
$900.00
$100 0.0146 $1.46
STEP 2: Find the APR. (Refer to the Annual Percentage Rate for Monthly
Payment Plans table on pages 794–795.)
In the row for 6 payments, find the number closest to $1.46. It is $1.46.
Read the APR at the top of the column. APR is 5.00 percent.
REVIEW EXERCISES
For Problems 33–36, refer to the Annual Percentage Rate for Monthly Payment
Plans table on pages 794–795.
Finance Amount Finance Charge Number of Annual
Charge Financed per $100 Payments Percentage Rate
33. $ 45.20 $2,000 a. 6 b.

34. 84.24 3,600 a. 12 b.
35. 160.00 2,500 a. 18 b.
36. 81.00 4,500 a. 18 b.

Test-Taking Tip
On most tests you can get as much credit for correctly answering the easy
questions as you do for correctly answering the difficult ones. Answer the
easy questions first and then spend time on the more challenging questions.
SECTION ONE: MULTIPLE CHOICE
This section contains six multiple-choice 4. Charles Quick’s bank granted him
questions. After working each problem, a single-payment loan of $3,240 for
write the letter of the correct answer on 100 days at an exact interest rate of
your paper. 6 percent. What is the maturity value
1. Alma Ying used her bank charge card to of his loan?
purchase a sound system. The system A $53.26 B $54.00
cost $995.99 plus 6 percent sales tax. C $3,293.26 D $3,294.00
What was the total purchase price on the
5. Valerie Beecher purchased a car for
sales receipt?
$4,000. She will finance the car with an
A $59.76 B $936.23 installment loan from the bank but would
C $1,055.75 D $1,055.76 like to finance no more than $2,500. What
2. Find the new balance on the charge percent of the total cost of the car should
account statement. her down payment be?
A 25 percent B 35 percent
Previous Closing Date Closing Date C 37.5 percent D 40.5 percent
Balance This Month Last Month
6. Lisa Snow obtained an installment loan
$175.41 November 13, 20-- October 14, 20-- of $2,300. The annual percentage rate is
Total Payments Finance New Minimum
18 percent. She plans to repay the loan
Purchases & Credits Charge Balance Payment in 24 months. (Use the table to find the
finance charge.) What is the monthly
$72.59 $50.00 $1.90 — payment?
A $150.92 B $154.72 Monthly Payment on a $100 Loan

C $199.90 D $299.99 Term in Annual Percentage Rate
3. Tom DuVall obtained a 36-month loan Months 15.00% 16.00% 17.00% 18.00%
of $4,350 for a used car. The interest 6 17.40 17.45 17.50 17.55
rate is 8 percent. His monthly payment 12 9.03 9.07 9.12 9.17
is $124.62. What is the payment to 18 6.24 6.29 6.33 6.38
principal for the first payment? 24 4.85 4.90 4.94 4.99
A $95.56 B $95.57 30 4.02 4.07 4.11 4.16
C $95.62 D $95.75
A $114.77 B $454.48
C $507.63 D $2,754.48

SECTION TWO: FREE RESPONSE
This section contains four questions for to make 24 payments of $30.31 each.
which you will supply short answers. Write Find the annual percentage rate.
your answer on your paper. (Use this table.)
7. Rocky Butler obtained a 12-month
Finance Charge per $100 Financed
loan of $1,540.00. The interest rate
is 12 percent. His monthly payment is Number of APR
Payments 14.50% 14.75% 15.00%
$136.75. For the first payment, what is
the interest? What is the payment to 6 $ 4.27 $ 4.35 $ 4.42
principal? What is the new principal? 12 8.03 8.17 8.31
18 11.87 12.08 12.29
8. Linda Hartman took out a simple
interest loan of $3,600.00 at 18 percent 24 15.80 16.08 16.37
for 12 months. After 9 payments, the
balance is $960.48. She pays off the loan 10. Jane Tripp had a previous balance of
when the next payment is due. What is $4,532.66 on an installment loan through
the interest? What is the final payment? her bank. The interest rate is 4 percent.
What is the interest for the next payment?
9. Juan Corvez obtained an installment
What is the final payment if she decides to
loan of $625.00 to pay for a new stove.
pay off the loan as she makes this payment?
The finance charge is $102.44. He agreed
SECTION THREE: OPEN-ENDED
This section contains four open-ended purchases) and the unpaid-balance

questions. Demonstrate your knowledge method. Which one is less expensive to
by giving a clear, concise solution to each the consumer?
problem. Your score on these problems will
13. The use of credit is widespread. Some
depend on how well you do on the following:
people use credit cards and take out
• Explain your reasoning. loans for emergencies only. Others
• Show your understanding of mathematics believe credit is necessary for everyday
in an organized manner. living. Explain your position.
• Use charts, graphs, and diagrams in your
explanation. 14. Explain how can you use the APR of
• Show the solution in more than one way or loans to compare the relative cost of
relate it to other situations. borrowing money.
• Investigate beyond the requirements of the
problem.
11. Why should you review your charge
account statement when you receive it? To learn more about loans,
What should you look for?
visit busmath.glencoe.com.
12. Create a sample problem and compute
the finance charge using the average-
daily-balance method (with no new
Cu mulat ive Test Pre p 䊳 311

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What You’ll Learn

Section 8-1 Compute the maturity value and

Key Words to Know

282 䊴 Chapter 8 Loans

Last winter photographer Al Chen hiked in

A Little Fatherly Advice . . . . . . . . .p. 287

A Model for Improvement . . . . . . . .p. 290

It’s Payback Time . . . . . . . . . . . . .p. 294

You Need a Plan . . . . . . . . . . . . . .p. 297

How Much Are Your

Analyze the Story . . . . . . . . . . . . .p. 305

Important What Formulas

When Your Dad Doesn’t Have Deep Pockets Chen’s friend

284 䊴 Chapter 8 Loans

S e c t i o n 8 - 1 Sing le-Pay me nt Lo ans 䊳 285

Interest Rates Maturity

11. Maria Rodriquez. 12. Manuel Bruins.

MAINTAINING YOUR SKILLS

Write the percents as decimals.

286 䊴 Chapter 8 Loans

Important What Formulas

S e c t i o n 8 - 2 Installme nt Lo ans 䊳 287

1140 20 228 912

SECTION 8-2 PRACTICE

Cash Down Payment Down Payment Amount

288 䊴 Chapter 8 Loans

MAINTAINING YOUR SKILLS

Write the percents as decimals.

S e c t i o n 8 - 2 Installme nt Lo ans 䊳 289

Important What Formulas

A Model for Improvement Mr. Chen uses a home remodeling

290 䊴 Chapter 8 Loans

S e c t i o n 8 - 3 Simple Interest Installme nt Lo ans 䊳 291

SECTION 8-3 PRACTICE

Term Table Amount Monthly Total Finance

8. Hazel Basnett. 9. Brian Anderson.

292 䊴 Chapter 8 Loans

17. Aurora Kaylow obtained an installment loan of $6,000 on a used sailboat.

MAINTAINING YOUR SKILLS

S e c t i o n 8 - 3 Simple Interest Installme nt Lo ans 䊳 293

Important Questions What Formulas Do I Use?

It’s Payback Time Chen reads the bank’s brochure. The

294 䊴 Chapter 8 Loans

S e c t i o n 8 - 4 Installme nt Lo ans—Allocat ion of Monthly Pay me nt 䊳 295

Loan Interest Monthly Amount Amount New

5. $1,200 12% $106.56 $12.00 $94.56 a.

6. 2,400 8% 141.84 16.00 a. b.

7. 3,460 10% 207.95 a. b. c.

8. 1,011 10% 207.95 a. b. c.

10. 3,599 11% 318.15 a. b. c.

Repayment Schedule for a $2,400 Loan

MAINTAINING YOUR SKILLS

Find the percentage.

24. 6% of $340.80 25. 15% of $9,845.20 26. 7% of $12,346.97

296 䊴 Chapter 8 Loans

Important What Formulas

S e c t i o n 8 - 5 Pay in g O f f S i m p l e Int e re s t Ins t a l l m e n t Lo a n s 䊳 297

298 䊴 Chapter 8 Loans

Find the interest and the final payment.

Interest Previous Final