11.2 Outline

A. Terminology
     1. types of installments
         a. closed-ended
         b. open ended
     2. ways of calculating interest
         a. add-on interest
         b. amortization
B. Add-on interest
     1. installment loan formulas
     2. buying a car
C. Annual percentage rate (APR)
     1. APR formula
     2. compare 0% financing with APR
D. Open-edned credit
E.  Credit card interest
     1. finance charge
     2. previous balance method
     3. adjusted balance method
     4. average daily balance method
     5. grace period

11.2 Essential Ideas

Installment loans:
             AMOUNT OF INTEREST:                I = Prt

Formulas
             AMOUNT TO BE REPAID:              A = P + I   or   A = P(1 + rt)
             NUMBER OF PAYMENTS:             N = 12t
             AMOUNT OF EACH PAYMENT:   m = A/N
The annual percentage rate, or APR, is the rate paid on a loan when that rate is based on the actual amount owed for the length of time that it is owed.  It can be found for an add-on interest rate, r, with N payments by using the formula
                                     APR = 2Nr/(N + 1)

Methods of calculating credit card interest:
           Previous balance method  Interest is calculated on the previous month's balance.
           Adjusted balance method Interest is calculated on the previous month's balance
                  less credits and payments.
           Average daily balance method  Add the outstanding balances for each day in the
                 billing period and then divide by the number of days in the billing period to find
                 the average daily balance.