Finance Unit

1.9 Loans


Buying a Car


  1. Using the given advertisement, identify the
    1. Make/model of car: ____________________

      CR-V

    2. Price of car: ____________________

      $25,345

  2. Find an auto loan by shopping online. (Link to Bankrate.com) Select

    1) LOANS

    2) AUTO LOANS

    3) BEST AUTO LOANS

    1. Length of loan: ____________________

      60 months

    2. Interest rate: _____________________

      7.91%

  3. Calculate your monthly payment. Show formula and numbers used in the calculation.

    Monthly payment: ____________________ (keep in mind that this number does not include car insurance, maintenance, or gasoline)

    \(P M T=\frac{\left[P \times\left(\frac{R}{n}\right)\right]}{\left[1-\left(1+\frac{R}{n}\right)^{-n T}\right]}\)

    \(PMT=\frac{25345\left({\displaystyle\frac{.0791}{12}}\right)}{\left[1-\left(1+{\displaystyle\frac{.0791}{12}}\right)^{-12\ast5}\right]}\)

    $512.81

  4. Calculate the total amount paid over the life of the loan: ____________________

    \(512.81*12*5=\$30,768.60\)

  5. How much interest did you pay on this loan?

    \($30,768.60-$25,345=$5423.60\)

    6. Buying a House


    You buy a house for $290,000 with a 30 year mortgage at 6.7% interest.


    1. If your down payment is 5%, how much is the down payment?

      Down Payment: ____________________

      \(290,000(0.05)=14,500\)

      The down payment is $14,500.

    2. What is your mortgage/loan amount? (In other words, how much do you borrow from the bank?)

      Mortgage amount: ____________________

      \(290,000-14,500=275,500\)

      The mortgage amount is $275,500

    3. What is your monthly payment?

      Monthly Payment: ______________

      \(PMT=\frac{(P\times{\displaystyle\frac rn})}{\left[1-\left(1+{\displaystyle\frac rn}\right)^{-nt}\right]}\)

      \(PMT=\frac{(275,500\times{\displaystyle\frac{0.067}{12}})}{\left[1-\left(1+{\displaystyle\frac{0.067}{12}}\right)^{-12\ast30}\right]}\)

      The monthly payment is $1330.95

    4. What is the total amount you pay towards the mortgage at the end of the 30 years?

      \(1330.95(12)(30) = $479,142\)

    5. How much of the total payment towards the mortgage is interest payment?

      \($479,142 - $275,500 = $203,642\)