EDPUZZLE: Amortization
Home mortgages, auto loans, and student loans are all typically structured as amortized loans. While the minimum monthly payment on a credit card changes each month, the monthly payment of an installment loan is the same every month until the debt is paid off. Watch this video and answer the questions on your worksheet.
FINCAP FRIDAY: Buy Now, Pay Later
In recent years, a different type of installment loan has become popular on online shopping checkout screens and even in some stores. It’s commonly referred to as “Buy now, pay later.” As your teacher progresses through the slides, answer these questions, just writing A, B, C, or D for questions 1 – 5.
ANALYZE: Understanding Amortization
Answer the questions on your worksheet using the amortization schedule on the first page.
EXIT TICKET: Choose the correct answers to the questions below.
- As you move through your payment schedule on an amortized loan, what will happen to the interest portion of each month’s payment?
- The interest portion will grow
- The interest portion will shrink
- The interest portion will stay the same
- The interest portion will sometimes grow and sometimes shrink
- It’s time for Roxanne to start repaying her student loans, which are amortized over the next ten years. Her first month’s payment due is $396. How much should she expect to owe next month?
- Substantially less than $396
- Slightly less than $396
- Exactly $396
- Slightly more than $396
- You’re debating whether to buy a trendy fall jacket that costs a whopping $200! You have it sitting in your online cart, and you see there’s a “Buy Now, Pay Later” option available for the jacket. Which best describes an example of how that would work?
- You pay the full $200 now, but they wait a month to send it to you, giving you the chance to cancel, penalty free, if you change your mind
- You pay $100 right now, you receive the jacket, and you owe $100 more a year later on the anniversary of your purchase date
- They ship you the jacket now, and you owe four $50 payments, once every 2 weeks, until the jacket is paid in full
- You reserve the jacket now, you pay as much or as little as you want in each payment, and when you eventually get to $200, they send you the jacket
LEARNING TARGETS:
- I can differentiate between amortized installment loans and revolving credit lines.
- I can read an amortization table and understand how the payments are structured.
- I can describe how Buy Now, Pay Later plans work.
