00:00Hi guys, so in this
00:02lesson we're going to look
00:03at loans and I'm going
00:04to show you the finance
00:05solver in a bit more
00:06detail. So I'm going to
00:08get, well I'll show you
00:09where to get this on
00:10the calculator in a second,
00:12but firstly I want to
00:13explain what each of these
00:14things are. Now I'm going
00:15to explain them through this
00:18example. So Mr. Flynn takes
00:21out a loan to buy
00:22a car that costs $24
00:23,000. So he's taking out
00:24$24 ,000. He will repay
00:26it over six years
00:28with an annual interest rate
00:31of 7 % compounded monthly.
00:34Calculate the monthly repayment. So
00:35he's going to make monthly
00:36repayments. Okay. Now what is
00:41n? Okay, we'll go through
00:43each of these now. n
00:45is the number of payments,
00:49but I've written total here.
00:51So he's doing 12 per
00:53year because they're monthly repayments
00:54and he's doing it for
00:56six
00:56six years. So it's six
00:57times 12, which is 72.
01:00Now this example is actually
01:02this is similar to my
01:06real life in that I
01:08did take out loan to
01:09buy a car and it
01:10did cost me about $24
01:11,000 and I did repay
01:13it over six years in
01:15fact. I'm still repaying it
01:16and I'll be repaying it
01:18up until like three months
01:22time. Something like that. I'm
01:24nearly
01:24paid it off. Thankfully. Anyway,
01:27and is 72. I is
01:29the interest rate. Interest rate
01:31is 7. So you can
01:32just put in 7. Easy.
01:36PV is the present value.
01:40Now, over here, I've written
01:42negative if money is moving
01:43away from you. Positive if
01:45money is coming towards you.
01:46So if you're taking out
01:47a loan, you put in
01:49a positive value, 24 ,000.
01:51If you're in
01:52besting money if I was
01:53investing 10 ,000 in the
01:56bank or something, I put
01:57negative 10 ,000. That's important.
02:00Payment is the payment we're
02:02going to make each time
02:04period. Now, this is the
02:06thing I don't actually know
02:07yet. I'm trying to find
02:08that. So I just put
02:09question mark. Future value. Now,
02:15if I'm going to pay
02:16it back and I'm trying
02:18to find out how much
02:19I pay back every month,
02:20The future value is zero
02:22because I'll have paid it
02:23back so that we know
02:24it'll be it'll be gone
02:26It'll be finished. So that's
02:27why I'm gonna put zero
02:28for future value Pp wise
02:30payments per year payments per
02:33year Payments per year is
02:3612 because I'm doing it
02:36monthly so 12 year in
02:38per year and it says
02:39compounded monthly so I'm gonna
02:41put for CPY Compounding periods
02:45per year is also 12
02:48And then this means the
02:51payments made at the end
02:52of the month or the
02:54start of the month. Now
02:55it's nearly always the end
02:55of the month, but just
02:57if they ever said at
02:58the beginning of the month,
02:59we're going to stick with
03:01end. Now two things. Firstly,
03:05I want you to be
03:06aware that without this finance
03:07solver, this is a really,
03:09really complicated problem. Like even
03:11with a formula, it's really
03:13not a straightforward, it's really
03:16not a straightforward
03:16for a question because what's
03:17happening is every month he
03:19pays a bit of money
03:20and then the interest is
03:24calculated on that new amount
03:26and then that happens in
03:27the next point and it
03:28just keeps happening every time.
03:29So it's actually really, really
03:30complicated problem. But we'd find
03:31it's over. I'm going to
03:33show you how it is
03:35really easy. Okay. So yeah,
03:41sorry. That was the second
03:41thing that I wanted to
03:43show you how easy it
03:44was.
03:44This is the working I
03:47want you to put down
03:48you literally write down this
03:50for your working So I'm
03:51gonna do menu finance finance
03:55solver the number of compounding
03:58or sorry the number of
04:00Payments will be 72 6
04:03times 12 72 the interest
04:05rate is 7 the present
04:07value is 24 ,000. That's
04:09the loan the payment. I
04:11don't know so just leave
04:12that a second
04:12And I'll show you what's
04:13going to happen. The future
04:15value is zero. It's already
04:17zero. Payments per year is
04:1812. Compounding periods per year
04:23is 12. And it's going
04:24to happen at the end.
04:26OK, now I go to
04:27payment and I press enter.
04:29And it tells me what's
04:32going to happen now. See,
04:34it's negative. That's because it's
04:38negative because the money's going
04:39to be moving away from
04:40you because I'm going to
04:40be
04:40paying negative 409. So let's
04:43round that to the nearest
04:44decimal. So the monthly payments
04:47monthly payments payment is monthly
04:55payment is $409 .18. $49
05:01.18. Fine, easy. Part B.
05:08find the total repayment. So
05:12I'm going to pay 409
05:14.18. I'm going to pay
05:18that for 72 months. And
05:24again, that's exactly what happened.
05:25This is what I did.
05:27It was close to $24
05:30,000. I can't remember exactly
05:31what it was, but it
05:32was something like this. And
05:34yeah, I pay pretty much
05:35close to 409.
05:36dollars per month. But I'm
05:40doing it for 72 months.
05:42So I'm going to do
05:43409 .18 times 72 to
05:47see how much now I
05:48actually have interested to find
05:50out here how much I'm
05:52going to pay for this
05:53car. 409 .18 times 72.
06:01So 29 ,461 .29.
06:04a thousand, four hundred and
06:08sixty one. Now, what's happened?
06:12Well, I've ended up paying
06:14a lot more than twenty
06:16four twenty four thousand because
06:18the car cost twenty four
06:20thousand and I've paid twenty
06:21nine thousand. So, have I
06:24been ripped off? Well, no,
06:25because I didn't have twenty
06:27four thousand to pay. So
06:28that's, that's how it works.
06:30You take out a loan
06:31and you pay interest. And
06:32when
06:33When you take into account
06:34inflation, it's probably not that
06:36bad. Remember, we've done a
06:39lesson on inflation and if
06:41you don't remember, there is
06:42a lesson on inflation that
06:43you need to watch. Okay,
06:45fine. And then last question
06:47is quite easy. It says
06:48the interest charged. So this
06:50is what it cost. This
06:52is what I paid. How
06:53do I find the interest?
06:54Well, just subtract it. 29461
06:58minus 24 ,000.
07:01Equals, I'm just going to
07:03do that in my head.
07:05It's going to be $5
07:06,461. Okay, that's it. I
07:15hope you recognized that with
07:20finance over, that's a really,
07:22really nice question. Obviously, there's
07:24lots of different things they
07:25can ask you, but generally,
07:29Generally, if you have finance
07:33over, you can just read
07:34the question, find out what
07:36each of these are and
07:37press enter and whatever one
07:38you need to get. If
07:40they said to you, they
07:43could say to you, he
07:45paid $409 .18 every month,
07:51what was his interest rate?
07:52I'll show you that. You
07:55could then
07:57like a menu finance fan
07:59and solver. If they didn't
08:02tell me the interest rate,
08:03imagine I don't know the
08:04interest rate. And he said
08:05he paid $49 .18 or
08:08whatever every month. What was
08:12the interest rate? Well, then
08:13you fill in all the
08:14other stuff, go to the
08:15interest rate, press enter, and
08:17then you get it, $6
08:17.99. And I know the
08:19reason it's not seven, obviously,
08:21is because this has been
08:23rounded to three decimal places,
08:24but yeah,
08:25obviously 7%. So yeah, finance
08:28over is a great little
08:30tool to have on your
08:32calculator.