single-payment loans
DESCRIPTION
SECTION. 8-1. pp. 284-286. Single-Payment Loans. Compute: maturity value of a single-payment loan interest rate of a single-payment loan. Section Objective. Key Words to Know. single-payment loan (p. 284) A loan that has to be repaid with one payment after a specified period of time. - PowerPoint PPT PresentationTRANSCRIPT
Single-Payment Loans pp. 284-2868-1SECTIONSECTION
• Click to edit Master text styles
• Second level
• Third level
• Fourth level
• Fifth level
2
SECTION
Copyright © Glencoe/McGraw-Hill MBA, Section 8-1, Slide 2 of 20
8-1
Section ObjectiveSection ObjectiveCompute:
• maturity value of a single-payment loan
• interest rate of a single-payment loan
• Click to edit Master text styles
• Second level
• Third level
• Fourth level
• Fifth level
3
SECTION
Copyright © Glencoe/McGraw-Hill MBA, Section 8-1, Slide 3 of 20
8-1
single-payment loan (p. 284)
A loan that has to be repaid with one payment after a specified period of time.
promissory note (p. 284)
A written promise to pay a certain sum of money on a certain date in the future.
Key Words to KnowKey Words to Know
• Click to edit Master text styles
• Second level
• Third level
• Fourth level
• Fifth level
4
SECTION
Copyright © Glencoe/McGraw-Hill MBA, Section 8-1, Slide 4 of 20
8-1
maturity value (p. 284)
The total amount that must be repaid on a loan, including the principal borrowed and the interest owed.
term (p. 284)
The amount of time for which a loan is granted before it has to be repaid.
Key Words to KnowKey Words to Know
• Click to edit Master text styles
• Second level
• Third level
• Fourth level
• Fifth level
5
SECTION
Copyright © Glencoe/McGraw-Hill MBA, Section 8-1, Slide 5 of 20
8-1
ordinary interest (p. 284)
Interest on a loan calculated by basing the time of the loan on a 360-day year.
exact interest (p. 284)
Interest on a loan calculated by basing the time of the loan on a 365-day year.
Key Words to KnowKey Words to Know
• Click to edit Master text styles
• Second level
• Third level
• Fourth level
• Fifth level
6
SECTION
Copyright © Glencoe/McGraw-Hill MBA, Section 8-1, Slide 6 of 20
8-1
Interest = Principal × Rate × Time
Formula 1Formula 1
• Click to edit Master text styles
• Second level
• Third level
• Fourth level
• Fifth level
7
SECTION
Copyright © Glencoe/McGraw-Hill MBA, Section 8-1, Slide 7 of 20
8-1
Ordinary Interest = Principal × Rate × Time ÷ 360
Exact Interest = Principal × Rate × Time ÷ 365
Formula 2Formula 2
• Click to edit Master text styles
• Second level
• Third level
• Fourth level
• Fifth level
8
SECTION
Copyright © Glencoe/McGraw-Hill MBA, Section 8-1, Slide 8 of 20
8-1
Maturity Value = Principal + Interest Owed
Formula 3Formula 3
• Click to edit Master text styles
• Second level
• Third level
• Fourth level
• Fifth level
9
SECTION
Copyright © Glencoe/McGraw-Hill MBA, Section 8-1, Slide 9 of 20
8-1
A Picture Perfect Loan p. 284A Picture Perfect Loan p. 284
How might a loan from Chen’s dad be different than a loan from a bank?
• Click to edit Master text styles
• Second level
• Third level
• Fourth level
• Fifth level
10
SECTION
Copyright © Glencoe/McGraw-Hill MBA, Section 8-1, Slide 10 of 20
8-1
Anita Sloane’s bank granted her a single-payment loan of $72,000 for 91 days at 12 percent ordinary interest.
What is the maturity value of the loan?
Example 1Example 1
• Click to edit Master text styles
• Second level
• Third level
• Fourth level
• Fifth level
11
SECTION
Copyright © Glencoe/McGraw-Hill MBA, Section 8-1, Slide 11 of 20
8-1
Find the ordinary interest owed.
Principal × Rate × Time
$7,200.00 × 12% × 91/360 = $218.40
Example 1 Answer: Example 1 Answer: Step 1Step 1
• Click to edit Master text styles
• Second level
• Third level
• Fourth level
• Fifth level
12
SECTION
Copyright © Glencoe/McGraw-Hill MBA, Section 8-1, Slide 12 of 20
8-1
Find the maturity value.
Principal + Interest Owed
$7,200.00 + $218.40 = $7,418.40
Example 1 Answer: Example 1 Answer: Step 2Step 2
• Click to edit Master text styles
• Second level
• Third level
• Fourth level
• Fifth level
13
SECTION
Copyright © Glencoe/McGraw-Hill MBA, Section 8-1, Slide 13 of 20
8-1
Anita Sloane’s bank granted her a single-payment loan of $72,000 for 91 days at 12 percent exact interest.
What is the maturity value of the loan?
Example 2Example 2
• Click to edit Master text styles
• Second level
• Third level
• Fourth level
• Fifth level
14
SECTION
Copyright © Glencoe/McGraw-Hill MBA, Section 8-1, Slide 14 of 20
8-1
Find the exact interest owed.
Principal × Rate × Time
$7,200 × 12% × 91/365 = $215.408 or $215.41
Example 2 Answer: Example 2 Answer: Step 1Step 1
• Click to edit Master text styles
• Second level
• Third level
• Fourth level
• Fifth level
15
SECTION
Copyright © Glencoe/McGraw-Hill MBA, Section 8-1, Slide 15 of 20
8-1
Find the maturity value.
Principal + Interest Owed
$7,200.00 + $215.41 = $7,415.41
Example 2 Answer: Example 2 Answer: Step 2Step 2
• Click to edit Master text styles
• Second level
• Third level
• Fourth level
• Fifth level
16
SECTION
Copyright © Glencoe/McGraw-Hill MBA, Section 8-1, Slide 16 of 20
8-1
Single payment loan of $2,750.
Interest rate of 11 percent.
Exact day of interest: 50.
What is the interest owed?
Practice 1Practice 1
• Click to edit Master text styles
• Second level
• Third level
• Fourth level
• Fifth level
17
SECTION
Copyright © Glencoe/McGraw-Hill MBA, Section 8-1, Slide 17 of 20
8-1
$41.44
Practice 1 AnswerPractice 1 Answer
• Click to edit Master text styles
• Second level
• Third level
• Fourth level
• Fifth level
18
SECTION
Copyright © Glencoe/McGraw-Hill MBA, Section 8-1, Slide 18 of 20
8-1
Emily Andrews borrowed $16,382. Her bank granted her a single-payment loan for 286 days at 11.5 percent ordinary interest.
What is the interest owed?
What is the maturity value of her loan?
Practice 2Practice 2
• Click to edit Master text styles
• Second level
• Third level
• Fourth level
• Fifth level
19
SECTION
Copyright © Glencoe/McGraw-Hill MBA, Section 8-1, Slide 19 of 20
8-1
Interest owed: $1,496.68
Maturity value of loan: $17,878.68
Practice 2 AnswerPractice 2 Answer
Single-Payment Loans8-1END OF SECTIONEND OF SECTION