Financial Algebra Ch 4.1-4.2

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What is the formula to calculate monthly payments on a loan?

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Monthly Payment = P[r(1 + r)^n] / [(1 + r)^n – 1], where P = principal, r = monthly interest rate, n = number of payments.

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What does APR stand for in financial terms?

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APR stands for Annual Percentage Rate, which is the annual rate charged for borrowing or earned through an investment.

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What is a downpayment?

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A downpayment is a portion of the total purchase price that is paid upfront at the time of purchase.

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What is interest in the context of loans?

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Interest is the fee charged by a lender to a borrower for the use of borrowed money, typically expressed as a percentage.

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How do you calculate the total cost of a loan?

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Total Cost = Monthly Payment x Number of Payments.

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What are late fees?

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Late fees are charges imposed when a borrower fails to make a payment by the due date.

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What is the difference between a secured and unsecured loan?

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A secured loan is backed by collateral, while an unsecured loan is not backed by any collateral.

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What is the purpose of a credit score?

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A credit score is used by lenders to assess the creditworthiness of a borrower.

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What is the impact of a higher credit score on loan terms?

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A higher credit score typically results in lower interest rates and better loan terms.

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What is the role of credit card companies in consumer finance?

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Credit card companies provide consumers with credit to make purchases, charging interest on unpaid balances.