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Solving Problems: Business & Consumer Loans
Solving Problems: Business & Consumer Loans
Get ready to put your knowledge into practice! In this lesson, we'll tackle real-world scenarios involving business and consumer loans, applying the concepts and formulas we've learned.
Get ready to:
Solve problems related to business loans, such as calculating interest payments, total loan costs, and amortization schedules.
Solve problems related to consumer loans, including determining monthly payments for mortgages, auto loans, and personal loans.
Analyze loan options and make informed borrowing decisions based on interest rates, terms, and repayment schedules.
By the end of this lesson, you'll be equipped to confidently navigate the world of loans, making sound financial decisions for both business and personal needs. Let's put our skills to the test!
Activity: The Loan Comparison Challenge
Activity: The Loan Comparison Challenge
Scenario: You need a loan of ₱100,000. You're offered two options:
Loan A: 5% interest per year, repaid over 5 years.
Loan B: 3% interest per year, repaid over 10 years.
Which loan seems more appealing at first glance? Calculate the total interest paid for each loan. Does this change your initial impression? Which loan would you choose and why?.
Analysis: Analyzing Loan Costs
Analysis: Analyzing Loan Costs
How does the length of a loan term affect the total interest paid? How does it affect the monthly payment amount?
Why might someone choose a loan with a higher interest rate but a shorter term? What are the trade-offs involved?
If you know the monthly payment, loan term, and interest rate, how can you calculate the principal loan amount?
Use online loan calculators to compare different loan scenarios for a car or a house. How do changes in interest rates and loan terms affect the overall cost?
This lesson focuses on solving problems related to business and consumer loans, specifically amortization and mortgages.
Examples
Examples
Let's break down the examples:
Example 1: Business Loan
Principal (P): P1,000,000
Interest Rate (r): 7% per year
Time (t): 1 year
To find the total amount to be paid after one year, we calculate the simple interest:
Interest (I) = P * r * t = P1,000,000 * 0.07 * 1 = P70,000
Total Amount = Principal + Interest = P1,000,000 + P70,000 = P1,070,000
Therefore, Mr. Garcia has to pay P1,070,000 after one year.
Example 2: Chattel Mortgage
Principal (P): P1,200,000
Monthly Payment: P31,000
Loan Term: 5 years = 60 months
To find the total interest paid, we calculate:
Total Paid = Monthly Payment * Number of Months = P31,000 * 60 = P1,860,000
Total Interest = Total Paid - Principal = P1,860,000 - P1,200,000 = P660,000
The total amount of interest paid for the car loan is P660,000.
Example 3: Mortgage Down Payment
House Price: P3,000,000
Down Payment: 20% of the house price
To calculate the down payment:
Down Payment = 0.20 * P3,000,000 = P600,000
The amount of the mortgage is the difference between the house price and the down payment:
Mortgage = House Price - Down Payment = P3,000,000 - P600,000 = P2,400,000
Become a master of loan calculations! Here's a video lesson to understand more about solving problems related to business and consumer loans, including amortization and mortgage payments!
Time to put your loan knowledge into practice! This assessment focuses on your ability to solve real-world problems related to business and consumer loans. Get ready to tackle calculations involving interest, amortization schedules, and mortgage payments.
Application: Solving Loan Problems
Application: Solving Loan Problems
Instruction: Use online resources, critical thinking, and the provided information to answer the following questions. Justify your answers with explanations and calculations. Upload your documents on this google drive link: Module 4 Lesson 2 Activity Outputs
(Note: Make sure your file name will be your Section-Year-Surname-Given_Name-Module#-Lesson#-Output#, for example: [GAS11-DelaCruz-Juan-Module1-Lesson1-Output1]. Wrong file name will subject to score deduction.)
Scenario: A small business owner secures a business loan of ₱500,000 at an effective interest rate of 8%, to be repaid in full after 2 years.
Question: Calculate the total amount to be repaid after 2 years. How much of this amount represents the interest paid?
Real-World Application: Research the concept of a chattel mortgage in the Philippines.
Question: What are the common types of movable properties used as collateral in chattel mortgages? What are the advantages and disadvantages of using a chattel mortgage compared to other types of loans?
Mortgage Calculation: A house is purchased for ₱2,500,000, and the bank requires a 15% down payment.
Question: Calculate the amount of the mortgage. If the mortgage has a term of 20 years and an interest rate of 6% compounded monthly, what is the monthly mortgage payment?
Amortization Schedule: A car loan of ₱800,000 has an interest rate of 9% compounded monthly and a term of 4 years.
Question: Create a simplified amortization schedule for the first 6 months of the loan, showing the monthly payment, interest paid, principal paid, and outstanding balance.
Outstanding Balance Calculation: A loan has a monthly amortization of ₱15,000, an interest rate of 10% compounded monthly, and a term of 5 years.
Question: Calculate the outstanding balance after 24 payments using the prospective method. Explain the concept of the prospective method in your own words.
Mastered loan calculations? You're well on your way to becoming a savvy borrower! Head to the Module 4 Assessment!
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