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Names: ____________________ Date: ______________ Mod : _______

UNIT 4: Cost of Using Credit - Activity 14a: Auto/House Finance Loans

Learning Objective: You will learn the cost of using credit by computing the total cost of buying a new car and a home - calculating the total interest rate using calculators given the loan terms and interest rates. Then using the Amortization Table, you will add the total interest to the price of the car and home to find the total cost of using credit.

DIRECTIONS:

Working with a partner, define the following terms from the Student Guide. You have 10 minutes. Be ready to share out your answers. (6 pts)

1. Principal –

2. Interest –

3. Loan Term –

4. Installment loan –

5. Mortgage –

6. Amortization -

Using the table below, work with your partner and solve for total costs in the tables below. One partner will calculate the total cost of the first row and the other partner will calculate the total cost of the second row. Type/Write your answers on this sheet and save it in your h:drive. Raise your hand when both of you are finished.

Use to solve for car values

(6 pts)

|(Principal) Price of NEW |Monthly Payment |Total Interest |TOTAL COST OF CAR! |

|car* | | |Principal + Total Interest (include Amortization |

|*(use ) | | |value) |

|$25,000 | |Loan Term = 5 years; Interest Rate 5% |Car Price =__________ |

| | |Total Interest from Amortization Table = |Total Interest = ________ |

| | |$____________________ |Total Cost = |

|$25,000 | |Loan Term = 3 years; Interest Rate 4% |Car Price =__________ |

| | |Total Interest from Amortization Table = |Total Interest = ________ |

| | |$____________________ |Total Cost = |

Use: to find a home cost.

|Mortgage Cost |Monthly Payment |Total Interest |TOTAL COST OF Home! |

|$150,000 | |Loan Term = 15 years; |Mortgage Cost =__________ |

| | |Interest RATE = 2% |Total Interest = ________ |

| | |Total Interest from Amortization Table = |Total Cost = |

| | |$____________________ | |

|$150,000 | |Loan Term = 30 Years; |Home Cost =__________ |

| | |Interest Rate = 3% |Total Interest = ________ |

| | |Total Interest from Amortization Table = |Total Cost = |

| | |$____________________ | |

(6 pts)

1. What is an Amortization Table? (1 pt)

2. What happens to your total cost as the interest rate you pay on a loan goes UP? (1 pt)

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