# Learn by watching

• Loans (11 minutes 50 seconds, then try Exercises #7-8.

## Simple Interest

Simple Interest Formula

• $I=Prt$
• $A=P\:+\:Prt$

I = interest earned
P = principal (starting value)
A = amount in account (ending balance)
r = annual interest rate (percentage must be in decimal form)
t = number of years

Exercises (Part 1): Try these!

## Loans

Loan Formula

$A=\frac{d\left(1-\left(1+\frac{r}{n}\right)^{-\left(nt\right)}\right)}{\left(\frac{r}{n}\right)}$

A = amount borrowed
r = annual interest rate (percentage must be in decimal form)
t = number of years to pay off
n = number of compounding periods per year
d = regular repeated payment made

Exercises (Part 4): Try these!

7) You can afford a $1200/month mortgage. You qualify for a 30-year loan at 6.2%. How expensive of a house can you afford? 8) You want to buy a new car that costs$23,000.  You qualify for a 5-year loan at 5.7%.  How much will your monthly payments be?

## choosing the right formula

Exercises (Part 5): Try these!

9) You want to go on a family vacation cruise.  You need to save up $4500 in the next 2 years in order to pay for the tickets. How much money will you have to invest each week into an account earning 3.5% interest in order to have enough money? 10) You decide to invest your$3000 bonus.  You put it into an account earning 6.25% interest compounded monthly.  How much will be in your account after 5 years?

11) You qualify for a 5.35% 6-year car loan.  If you can only afford $235 monthly payments, how expensive of a car can you afford? 12) You find a treasury bond with a maturity value of$2000 in 10 years.  If the bond is earning 4% simple interest each year, how much is the purchase price?

13) What would be the monthly payment on a house loan of $350,000 if you qualify for a 30-year loan at 7.3%? 14) After you retire, you’d like to be able to take out$1500 each month for the following 20 years.  If your retirement account is earning 8.2% compounded monthly, how much money do you need in your account before your retire?  (hint — you are taking a “loan” from yourself for these payouts).