1 1 Section 8.1 I. Percent per hundred a. Fractions to Percents: 1. Write the fraction as an improper fraction 2. Divide the numerator by the denominator 3. Multiply by 100 (Move the decimal two times Right) 4. Attach a % sign. b. Decimals to Percents: 1. Move decimal two times Right 2. Attach % sign c. Percents to Decimals: 1. Move decimal two times Left 2. Remove % sign. II. A is P percent of B A = PB Sales tax = (item s cost)(tax rate) Total price = (item s cost) + (sales tax) Discount = (original price)(discount rate) Total price = (original price) (discount) Example: A CD player costs $380. a. The CD is marked 35% off. What is the discount amount? b. Sales tax in the area is 6%. What s the sale price with 6% tax after the discount?
2 2 III. Percent of Increase/Decrease Ex. For the $380 CD player marked 35% off, what is the percent of decrease? Ex. In 1965, one share was worth $18. In 2008, one share of the same stock was worth $96, 600. Find the percent of increase. Interpret what this means.
3 3 IV. Terms 1. Gross Income Income before all adjustments for the year, including wages, tips, investments, earnings, and unemployment compensation. 2. Adjustments Deductions, payments to tax-deferred savings plans. 3. Exemption A fixed amount of money for yourself, and an amount for all dependents, that is deducted from gross income. 4. Deductions An amount of money to be removed from the adjusted gross income. i. Standard deduction ii. Itemized Deduction Interest on mortgages, state income tax, property tax, charitable contributions, medical expenses greater than 7.5% of the adjusted gross income). Medical Expense >.075AGI 5. Filing Status Single, married filing separately, married filing jointly, head of household.
4 4 V. Income Tax Formulas 1. Adjusted Gross Income = Gross Income Adjustments 2. Taxable Income = AGI (Exemptions + Deductions) Look in the marginal tax table for Exemptions For deductions: Compare the standard deduction from the marginal tax table to the itemized deductions and choose the larger value. Remember to consider medical expenses when calculating the itemized deduction. Medical Expense >.075AGI 3. Income Tax = Tax Computation Tax Credits Find the Tax Computation using the marginal tax table. = Sum[(tax rates)(marginal income)]
5 5 VI. General Form of a Tax Table
6 6 VII. Example Calculate the income tax owed by a single man with no dependents with the given information. Gross Income: $40, 000 Adjustments: $ 1000 Deductions: $3, 000 Charitable Contributions $1, 500 Theft loss $300 cost of tax preparation $1,500 medical expenses Tax Credits: none
7 7 Section 8.2 Definitions 1. Interest Amount of money paid for lending and investing money. The amount owed for borrowing money. 2. Principal The amount borrowed or deposited. 3. Interest Rate Usually given as a percent value. 4. Simple Interest I=Prt I = interest earned P = principal invested r = interest rate (in decimal form!!) t = time (in years) month o if months, use t = 12 day o if days, use t = 360
8 8 Example Find the simple interest owed for borrowing principal P at interest rate r for time period t. a) P = $5,000 r = 5% t = 3 years b) P = $11,000 r = 6.5% t = 10 months c) P = $4,550 r = 11.5% t = 90 days
9 9 Definitions 1. Present Value The amount borrowed or deposited. The principal amount 2. Future value (A) The total amount owed or earned at the end of the loan, including interest. Future Value for Depositing Money A P( 1 rt) A = future value P = principal r = simple interest rate t = time in years How the formula was derived:
10 10 Example The principal of $2000 is deposited at simple interest rate 7.5% for time t. Find the future value when: a) t = 10 years b) t = 7 months c) t = 120 days
11 11 Example A bank offers a CD paying a simple interest at a rate of 5.25%. How much must you put in the CD now to have $5,000 for college tuition in five years? Comment: Generally, t A P Pr
12 12 Definition 1. Discount Interest deducted from a loan. 2. Discounted Loan Lenders collect interest owed from the loan at the time that the loan is made. Words and their implications 1. Deducted Interest or Loan s discount Use I = Prt 2. Net amount of money received Use P - I = P Prt = P(1-rt) 3. Actual interest rate Use I = Prt Plug in the deducted interest for I Plug in the net amount received for P I deducted_ int erest Solve for r to get r Pt ( net _ amt _ received)( t)
13 13 Example You borrow $5, 000 on a 9.5% discounted loan for a) 4 years b) 10 months. Determine the loan s discount, net amount of money you receive, and the loan s actual interest rate for each time period.
14 14 Section 8.3 Suppose that you have $15, 000 to invest in either: Money market at 3% interest compounded annually Savings account at 1.5% compounded annually Definitions 1. Compound Interest Interest computed on the original principal and on any accumulated interest. 2. Compound Period Period of time between two interest payments. Compounded annually n = 1 Compounded semiannually n = 2 Compounded quarterly n = 4 Compounded monthly n = 12 Compounded daily n = 365 Compounded continuously: think e General Equation to Calculate Simple Compound Interest A P 1 r t Value of Account = Original_ Investment 1 Interest_ Rate Time _ Period
15 15 Example Consider investing your money in two different accounts: i) a money market account earning 3% compounded annually ii) a savings account earning 1.55% compounded annually. a) Model the potential growth for $1, 500 invested in each account. b) Compare the investments after 10 years.
16 16 Compounding n times a year for t years A P 1 r n nt A = future value P = present value = initial investment = principal r = nominal interest rate as a decimal. (APR) n = number of compounding per year. t = number of years r n n 1-1 = effective interest rate (APY) This is the amount that you actually pay or earn in an account. Compounding continuously t years A rt Pe A = future value P = present value = initial investment = principal r = nominal interest rate as a decimal. (APR) t = number of years r e - 1 = effective interest rate (APY) This is the amount that you actually pay or earn in an account.
17 17 Example You invest $50 into a mutual fund paying a nominal interest rate of 7.2%. Find the future value for each case. a) Compounded annually for 6 months. b) Compounded quarterly for 2 years. Also find the effective interest rate and the nominal interest rate. c) Compounded daily for 2 years. d) Compounded continuously for 8 months. Also find the effective interest rate and the nominal interest rate.
18 18 Definition Effective annual yield / effective rate / annual percentage rate The simple interest rate that produces the same amount I = Prt of money in an account at the end of one year as when the account is subjected to compounding interest at the stated rate. The true interest rate paid/earned. Investing: You want to choose the highest effective annual yield. Borrowing: you want to choose the lowest annual percentage rate (all other factors being equal) Y (1 r n ) 1 r n Y e 1 or Where: r is the interest rate as a decimal n is the number of compounding per year Y is the effective annual yield (APY). Be sure to write your final answer as a %!
19 19 Example An account has a nominal rate of 4.6%. Find the effective annual yield, rounded to the nearest tenth of a percent, with: a) quarterly compounding b) monthly compounding c) daily compounding. How does changing the compounding period affect the annual yield?
21 21 Section 8.4 I. Pensions Goal: Here s my income, what can I afford to invest today? You have no control over the amount of money available at retirement (income received per month in the future) because it s a present amount. Pensions are usually paid by an employer and are not guaranteed money because payments are based on investments in stocks. Pensions are paid after a certain age, not after a certain time period. Real Life Example of why pensions are NOT guaranteed retirement money: A United Employee retired with a pension. United went bankrupt and used all of its employees pension money to try to save the business. In other words, the retiree s pension was gone! The government stepped in and paid pennies on the dollar, which means that the retirees pension was essentially gone.
22 22 II. Annuities Goal: Here s the income I need in the future, what s my monthly payment? Definition: A sequence of equally payments or receipts made at equal time intervals. In other words, payouts are made in equal amounts after a certain time period (not a certain age). You control and plan for the amount of money available at retirement (income received per month in the future). Annuity formulas amortize your deposit to calculate the future value of the money based on the present value. Annuity money is safe/guaranteed. Example: When you win the lottery, you can get a lump sum payment (present value) or you can get a series of payments (future value/annuity) Value of an Annuity = all deposits + all interest paid Compounded Once per Year: P[(1 A r) r t 1] Compounded n times per Year: A P[(1 r ) n r n nt 1] Think of A as the ending value, the goal that you want to reach. Total deposits = Pt Interest Earned = (Ending value) (Total deposits) = A - Pt
23 23 Example At age 21, you decide to save for retirement by investing $150 at regular intervals into an IRA paying 6.55% compounded at regular intervals for 20 years. a) Find the value at the end of each year when interest is compounded annually. b) Find the value at the end of each month when interest is compounded annually. c) Find the value at the end of 3 months when interest is compounded quarterly. A P[(1 r ) n r n nt 1]
24 24 Ordinary Annuity Deposit made at the end of each compounding period. Annuity Due Deposit make at the beginning of the compounding period. So how do you decide on the amount of money to deposit? P A r n nt 1 r 1 n P = deposit/principal A = value of the annuity after t years. The goal you want to reach. The ending value. t = time in years. n = compounding n times per year r = interest rate as a decimal.
25 25 Example Determine the periodic deposit and how much of the financial goal comes from deposits and how much comes from interest at the end of every six months at a rate of 4.75% compounded semiannually for 35 years with a financial goal of $150, 000. P A r n nt 1 r 1 n
26 26 III. Definitions Cash Investment Deposit money into an account. Return The percent increase on investment. ex) annually/monthly/quarterly return is r%. Investment portfolio A listing of all investments a person holds. You want a diversified portfolio: mixture of low risk and high risk investments. Mutual funds: A group of stocks and bonds managed for you by the fund manager. You re money is combined with other people s money. The fund manager invests all the money to obtain maximum returns. Bond Investors lend money to a company. In return, the company agrees to pay back the bond and interest. Investors do not own a percentage of the company. Low risk. Face value: the amount that the bond is bought for. Share Percent of ownership in a company that an investor can purchase. Shareholder Any investor owning a percentage of the company.
27 27 Stock Share of ownership in a company that an investor can purchase. Shares are bought and sold at the stock exchange. Prices depend on the supply and demand, the economy, and the success of a business. Trading buying or selling stocks. Capital Gain sell shares for more money than they were purchased for. Capital Loss sell shares for less money than they were purchased for. Dividend A company distributes profit to each shareholder through dividends. The amount paid to a shareholder depends on the number of shares owned. Types of Stock According to Risk and Rewards
28 28 Stock Tables
29 29 Example a) What were the high and low prices for a share for the past 52 weeks? b) If you owned 700 shares of this stock last year, what dividend did you receive? c) What is the annual return on the dividends alone? How does this compare to a bank offering a 3% interest rate?
30 30 d) How many shares of this company s stock were traded yesterday? e) What were the high and low prices for a share yesterday? f) What was the price at which a share traded when the stock exchange closed yesterday? g) What was the change in price for a share of stock from the market close two days ago to yesterday s market close? h) Compute the company s annual earnings per share using yesterday ' s _ closin g _ price _ per _ share annual _ earning _ per _ share PE _ ratio
31 31 Section 8.5 Installment buying repay a loan for the cost of a product on a weekly basis. Installment loans- loans paid off with payments over a time period. Exs. Mortgage and credit cards. 1. Mortgage a long term installment loan for buying a house. Property is a security for payment. When there is no payment, the lender reposses the property. Fixed rate same monthly payment Adjustable rate/variable rate payment amount changes depending on changes in the interest rate. Down payment portion of the sale price the buyer immediately pays to the seller. Amount of mortgage = sale price down payment Point 1% of the amount of the mortgage paid to the lending institution. o 1 point =.01(amount of mortgage) o Fewer points = higher interest rate. o More points = lower interest rate. Escrow account holding account used by a seller. Your mortgage payment can include payments into an escrow account to pay real estate tax (property tax) and house insurance.
32 32 Summary for the parts of a mortgage: Selling price $120, % down payment Amount of mortgage 2 points at closing Parts of a monthly $1,000 mortgage payment: It is the bank s responsibility not to spend the escrow account money so that your tax and insurance gets paid. If the bank does not pay the money, then collectors come to you. Escrow Account Example: A lawyer asks for a retainer of $2000. That retainer goes into an escrow account. You re prepaying the lawyer, and all unused funds will be returned to you. If the case is reconciled, if he is disbarred, or if he does no work, then the full retainer is returned to you. Comment: We will not be considering escrow accounts when handling mortgages.
33 33 Regular Payment amount for principle and interest due: PMT PMT 1 1 r p n r n nt P = loan amount n = number of payments per year t = number of years r = annual interest rate. Cost of Interest = (Total of all monthly payments for one year) (mortgage amount) = (PMT)(number of payments per year)(number of years) (mortgage amount -down payment)
34 34 Example Selling price $120, % down payment Amount of mortgage Now let s say that we were financed for 15 years at 7.5%. a) Find the monthly payment PMT 1 1 r p n r n nt b) Find the total interest paid over 15 years.
35 35 II. Amortized to pay off a loan through a series of regular payments. Loan amortization schedule a document showing how monthly payments are split between interest and principal. Beginning: most of the payment goes to interest, and very little to principle. o Ex) Monthly payment $ payment #1: $ goes to interest and $ goes to principal. End: most of the payment goes to principal, little to interest. o Ex) payment # 179: $21.26 goes to interest and $ goes to principal. Schedule
36 36 Example Prepare a loan amortization schedule for Selling price $120, % down payment Amount of mortgage = 108, points at closing Financed for 15 years at 7.5% with monthly payment $ payments total.
37 37 III. Revolving Credit no schedule for paying a fixed amount each period; only a minimum monthly payment that depends on the unpaid balance and the interest rate. Ex) Credit Cards You re not charged interest if you buy a product and pay the entire balance during the same billing cycle. You are charged daily for cash advances. When you make the minimum payment, most of the payment goes to interest. Itemized billing a bill showing the details of your account. Looks like:
38 38 Formulas Credit Card Interest: I = Prt r = monthly interest rate P = average daily balance t = time in months (t = 1 for one billing cycle) Example: Credit card rate of 1.6% annual rate of Credit cards have HIGH interest rates. Average Daily Balance = Sum unpaid balance for each day in the billing cycle number of days in the billing period
39 39 Average Daily Balance = Sum unpaid balance #days in the billing period
40 40 Example A credit card calculates interest using the average daily balance method. The monthly interest rate is 1.1% of the average daily balance. The following transactions occurred during the November 1-November 30 billing period. a) Find the average daily balance. b) Find the interest paid for the next billing date, December 1. c) Find the balance due on December 1. d) This credit card requires a $10 minimum monthly payment if the balance due at the end of the billing period is less than $360. Otherwise, the minimum monthly payment is 1 of the balance due at 36 the end of the billing period, rounded up to the nearest whole dollar. What is the minimum monthly payment due by December 9?
Chapter Objectives Check off these skills when you feel that you have mastered them. Know the basic loan terms principal and interest. Be able to solve the simple interest formula to find the amount of
6 Formulas Discounted Cash Flow Valuation McGraw-Hill/Irwin Copyright 2008 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter Outline Future and Present Values of Multiple Cash Flows Valuing
Problem Set: Annuities and Perpetuities (Solutions Below) 1. If you plan to save $300 annually for 10 years and the discount rate is 15%, what is the future value? 2. If you want to buy a boat in 6 years
Mathematics of Finance Interest is the rental fee charged by a lender to a business or individual for the use of money. charged is determined by Principle, rate and time Interest Formula I = Prt $100 At
April 23 8.4 Annuities, Stocks and Bonds ---- Systematic Savings Annuity = sequence of equal payments made at equal time periods i.e. depositing $1000 at the end of every year into an IRA Value of an annuity
Chapter 6 Key Concepts and Skills Be able to compute: the future value of multiple cash flows the present value of multiple cash flows the future and present value of annuities Discounted Cash Flow Valuation
Finite Mathematics Helene Payne CHAPTER 6 Finance 6.1. Interest savings account bond mortgage loan auto loan Lender Borrower Interest: Fee charged by the lender to the borrower. Principal or Present Value:
1 To be used with: Title: Business Math (Without MyMathLab) Edition: 8 th Author: Cleaves and Hobbs Publisher: Pearson/Prentice Hall Copyright: 2009 ISBN #: 978-0-13-513687-4 Matt 109 Business Mathematics
1. Future Value of Multiple Cash Flows 2. Future Value of an Annuity 3. Present Value of an Annuity 4. Perpetuities 5. Other Compounding Periods 6. Effective Annual Rates (EAR) 7. Amortized Loans Chapter
Math of Finance Semester 1 Unit 2 Page 1 of 19 Name: Date: Unit 2.1 Checking Accounts Use your book or the internet to find the following definitions: Account balance: Deposit: Withdrawal: Direct deposit:
Chapter 2 Finance Matters Chapter 2 Finance Matters 2.1 Pe r c e n t s 2.2 Simple and Compound Interest 2.3 Credit Cards 2.4 Annuities and Loans Chapter Summary Chapter Review Chapter Test Handling personal
Discounted Cash Flow Valuation Chapter 5 Key Concepts and Skills Be able to compute the future value of multiple cash flows Be able to compute the present value of multiple cash flows Be able to compute
OHIO TREASURER S FINANCIAL EDUCATION GLOSSARY OF TERMS 401(k) An employer qualified retirement plan set up by a private company in which eligible employees may make salary-deferral (salary-reduction) contributions
300 Chapter 5 Finance 17. House Mortgage A couple wish to purchase a house for $200,000 with a down payment of $40,000. They can amortize the balance either at 8% for 20 years or at 9% for 25 years. Which
Finance 197 Finance We have to work with money every day. While balancing your checkbook or calculating your monthly expenditures on espresso requires only arithmetic, when we start saving, planning for
October 21, 2013 Last Time The Consumer Price Index Real Growth The Consumer Price index The official measure of inflation is the Consumer Price Index (CPI) which is the determined by the Bureau of Labor
Warm-up: Compound vs. Annuity! 1) How much will you have after 5 years if you deposit $500 twice a year into an account yielding 3% compounded semiannually? 2) How much money is in the bank after 3 years
6 Calculators Discounted Cash Flow Valuation Key Concepts and Skills Be able to compute the future value of multiple cash flows Be able to compute the present value of multiple cash flows Be able to compute
October 16, 2013 Last time Arithmetic Growth Simple Interest Geometric Growth Compound Interest A limit to Compounding Problems Question: I put $1,000 dollars in a savings account with 2% nominal interest
Percent, Sales Tax, & Discounts Many applications involving percent are based on the following formula: Note that of implies multiplication. Suppose that the local sales tax rate is 7.5% and you purchase
Amortized Loan Example Chris Columbus bought a house for $293,000. He put 20% down and obtained a 3 simple interest amortized loan for the balance at 5 % annually interest for 30 8 years. a. Find the amount
Chapter 6 Learning Objectives Principles Used in This Chapter 1. Annuities 2. Perpetuities 3. Complex Cash Flow Streams 1. Distinguish between an ordinary annuity and an annuity due, and calculate present
Exercise 1 for Time Value of Money MULTIPLE CHOICE 1. Which of the following statements is CORRECT? a. A time line is not meaningful unless all cash flows occur annually. b. Time lines are useful for visualizing
CHAPTER 1 Compound Interest 1. Compound Interest The simplest example of interest is a loan agreement two children might make: I will lend you a dollar, but every day you keep it, you owe me one more penny.
FINANCIAL SERVICES BOARD COLLECTIVE INVESTMENT SCHEMES INTRODUCTION This booklet will provide you with information on the importance of understanding ways in which Collective Investment Schemes ( CIS )
MAT116 Project 2 Chapters 8 & 9 1 8-1: The Project In Project 1 we made a loan workout decision based only on data from three banks that had merged into one. We did not consider issues like: What was the
13 Consumer Mathematics 13.1 The Time Value of Money Start with some Definitions: Definition 1. The amount of a loan or a deposit is called the principal. Definition 2. The amount a loan or a deposit increases
CHAPTER 1 Simple Interest and Simple Discount Learning Objectives Money is invested or borrowed in thousands of transactions every day. When an investment is cashed in or when borrowed money is repaid,
10. Time Value of Money 2: Inflation, Real Returns, Annuities, and Amortized Loans Introduction This chapter continues the discussion on the time value of money. In this chapter, you will learn how inflation
REVIEW MATERIALS FOR REAL ESTATE ANALYSIS 1997, Roy T. Black REAE 5311, Fall 2005 University of Texas at Arlington J. Andrew Hansz, Ph.D., CFA CONTENTS ITEM ANNUAL COMPOUND INTEREST TABLES AT 10% MATERIALS
Benefits of investing in the Stock Market There are many benefits to investing in shares and we will explore how this common form of investment can be an effective way to make money. We will discuss some
University of Rio Grande Fall 2010 Financial Management (Fin 20403) Practice Questions for Midterm 1 Answers the questions. (Or Identify the letter of the choice that best completes the statement if there
A Account A record of a business transaction. A contract arrangement, written or unwritten, to purchase and take delivery with payment to be made later as arranged. Accounts payable Money which you owe
Ch. 5 Mathematics of Finance 5.1 Compound Interest SHORT ANSWER. Write the word or phrase that best completes each statement or answers the question. Provide an appropriate response. 1) What is the effective
Present Value Concepts Present value concepts are widely used by accountants in the preparation of financial statements. In fact, under International Financial Reporting Standards (IFRS), these concepts
Section C.1: The Savings Plan Formula The savings plan formula Suppose you want to save money for some reason. You could deposit a lump sum of money today and let it grow through the power of compounding
COMMON INVESTMENT TERMS EXPLAINED ALL ABOUT REAL ESTATE, MUTUAL FUNDS, RETIREMENT PLANNING, STOCKS, AND BONDS 1 TABLE OF CONTENTS Mutual Fund Terms... 3 Retirement and Education Terms... 7 Stock Market
Integrated Case 5-42 First National Bank Time Value of Money Analysis You have applied for a job with a local bank. As part of its evaluation process, you must take an examination on time value of money
2 The Mathematics of Finance Copyright Cengage Learning. All rights reserved. 2.3 Annuities, Loans, and Bonds Copyright Cengage Learning. All rights reserved. Annuities, Loans, and Bonds A typical defined-contribution
CHAPTER 5 INTRODUCTION TO VALUATION: THE TIME VALUE OF MONEY 1. The simple interest per year is: $5,000.08 = $400 So after 10 years you will have: $400 10 = $4,000 in interest. The total balance will be
lesson twelve saving and investing overheads pay yourself first (a little can add up) example 1: Save this each week At % Interest In 10 years you ll have $7.00 5% $4,720 14.00 5% 9,440 21.00 5% 14,160
MAT 142 College Mathematics Finance Module #FM Terri L. Miller & Elizabeth E. K. Jones revised December 16, 2010 1. Simple Interest Interest is the money earned profit) on a savings account or investment.
Solutions to Supplementary Questions for HP Chapter 5 and Sections 1 and 2 of the Supplementary Material 1. a) Let P be the recommended retail price of the toy. Then the retailer may purchase the toy at
FIN 301 Homework Solution Ch4 Chapter 4: Time Value of Money 1. a. 10,000/(1.10) 10 = 3,855.43 b. 10,000/(1.10) 20 = 1,486.44 c. 10,000/(1.05) 10 = 6,139.13 d. 10,000/(1.05) 20 = 3,768.89 2. a. $100 (1.10)
Advantages and disadvantages of investing in the Stock Market There are many benefits to investing in shares and we will explore how this common form of investment can be an effective way to make money.
4D Income Taxes there are 5 different categories Single You must be unmarried at the end of the year. Married filing jointly this is how most married people will file. Married filing separately occasionally,
SOCIETY OF ACTUARIES EXAM FM FINANCIAL MATHEMATICS EXAM FM SAMPLE QUESTIONS This page indicates changes made to Study Note FM-09-05. April 28, 2014: Question and solutions 61 were added. January 14, 2014:
TIME VALUE OF MONEY (TVM) INTEREST Rate of Return When we know the Present Value (amount today), Future Value (amount to which the investment will grow), and Number of Periods, we can calculate the rate
5.1 Simple and Compound Interest Question 1: What is simple interest? Question 2: What is compound interest? Question 3: What is an effective interest rate? Question 4: What is continuous compound interest?
Ordinary Annuities (Young: 6.2) In this Lecture: 1. More Terminology 2. Future Value of an Ordinary Annuity 3. The Ordinary Annuity Formula (Optional) 4. Present Value of an Ordinary Annuity More Terminology
Chapter 6 The Time Value of Money: Annuities and Other Topics Chapter 6 Contents Learning Objectives 1. Distinguish between an ordinary annuity and an annuity due, and calculate present and future values
CHAPTER 6 DISCOUNTED CASH FLOW VALUATION Answers to Concepts Review and Critical Thinking Questions 1. The four pieces are the present value (PV), the periodic cash flow (C), the discount rate (r), and
Chapter 4 Time Value of Money ANSWERS TO END-OF-CHAPTER QUESTIONS 4-1 a. PV (present value) is the value today of a future payment, or stream of payments, discounted at the appropriate rate of interest.
Homework 5 Solutions Chapter 4C Investment Plans. Use the savings plan formula to answer the following questions. 30. You put $200 per month in an investment plan that pays an APR of 4.5%. How much money
Chapter 2 - Sample Problems 1. If you wish to accumulate $140,000 in 13 years, how much must you deposit today in an account that pays an annual interest rate of 14%? 2. What will $247,000 grow to be in
Solutions Manual Corporate Finance Ross, Westerfield, and Jaffe 9 th edition 1 CHAPTER 1 INTRODUCTION TO CORPORATE FINANCE Answers to Concept Questions 1. In the corporate form of ownership, the shareholders
Math 120 Basic finance percent problems from prior courses (amount = % X base) 1) Given a sales tax rate of 8%, a) find the tax on an item priced at $250, b) find the total amount due (which includes both
CALCULATOR TUTORIAL INTRODUCTION Because most students that use Understanding Healthcare Financial Management will be conducting time value analyses on spreadsheets, most of the text discussion focuses
21.1 Arithmetic Growth and Simple Interest When you open a savings account, your primary concerns are the safety and growth of your savings. Suppose you deposit $1000 in an account that pays interest at
CHAPTER 4 DISCOUNTED CASH FLOW VALUATION Solutions to Questions and Problems NOTE: All-end-of chapter problems were solved using a spreadsheet. Many problems require multiple steps. Due to space and readability
8.1 Simple Interest and 8.2 Compound Interest When you open a bank account or invest money in a bank or financial institution the bank/financial institution pays you interest for the use of your money.
Chapter Discounted Cash Flow Valuation Compounding Periods Other Than Annual Let s examine monthly compounding problems. Future Value Suppose you invest $9,000 today and get an interest rate of 9 percent
Your name: Your section: MTH 150 SURVEY OF MATHEMATICS Chapter 11 CONSUMER MATHEMATICS 11.1 Percent 11.2 Personal Loans and Simple Interest 11.3 Personal Loans and Compound Interest 11.4 Installment Buying
319 CHAPTER 4 Personal Finance The following is an article from a Marlboro, Massachusetts newspaper. NEWSPAPER ARTICLE 4.1: LET S TEACH FINANCIAL LITERACY STEPHEN LEDUC WED JAN 16, 2008 Boston - Last week
SOCIETY OF ACTUARIES EXAM FM FINANCIAL MATHEMATICS EXAM FM SAMPLE QUESTIONS Interest Theory This page indicates changes made to Study Note FM-09-05. January 14, 2014: Questions and solutions 58 60 were
Introduction This Solutions Handbook has been designed to supplement the HP-2C Owner's Handbook by providing a variety of applications in the financial area. Programs and/or step-by-step keystroke procedures
Assist. Financial s Technology Solutions. About Our Financial s. Helping members with their financial planning should be a key function of every credit union s website. At Technology Solutions, we provide
In following we will introduce one of the most important and powerful concepts you will learn in your study of finance; the time value of money. It is generally acknowledged that money has a time value.
and Loans Mathematics Rome, University of Tor Vergata and Loans Future Value for Simple Interest Present Value for Simple Interest You deposit E. 1,000, called the principal or present value, into a savings
SEVENTH EDITION and EXPANDED SEVENTH EDITION Slide 11-1 Chapter 11 Consumer Mathematics 11.1 Percent 1 Percent The word percent comes from the Latin per centum, meaning per hundred. A percent is simply
CHAPTER 8 INTEREST RATES AND BOND VALUATION Answers to Concept Questions 1. No. As interest rates fluctuate, the value of a Treasury security will fluctuate. Long-term Treasury securities have substantial
Introduction to Real Estate Investment Appraisal Maths of Finance Present and Future Values Pat McAllister INVESTMENT APPRAISAL: INTEREST Interest is a reward or rent paid to a lender or investor who has
C- 1 Time Value of Money C- 2 Financial Accounting, Fifth Edition Study Objectives 1. Distinguish between simple and compound interest. 2. Solve for future value of a single amount. 3. Solve for future
1 Simple interest 2 5. Time value of money With simple interest, the amount earned each period is always the same: i = rp o We will review some tools for discounting cash flows. where i = interest earned
Annuities and Sinking Funds Sinking Fund A sinking fund is an account earning compound interest into which you make periodic deposits. Suppose that the account has an annual interest rate of compounded
FINA 351 Managerial Finance, Ch.4-5, Time-Value-of-Money (TVM), Notes The concept of time-value-of-money is important to know, not only for this class, but for your own financial planning. It is a critical
Because money doesn t come with instructions.sm Robert C. Eddy, CFP Margaret F. Eddy, CFP Matthew B. Showley, CFP Basic Investment Terms ANNUITY A financial product sold by financial institutions pay out
RON GRAHAM AND ASSOCIATES LTD. 10585 111 Street NW, Edmonton, Alberta, T5M 0L7 Telephone (780) 429-6775 Facsimile (780) 424-0004 Email email@example.com How Can You Reduce Your Taxes? Tax Brackets.
9. Time Value of Money 1: Present and Future Value Introduction The language of finance has unique terms and concepts that are based on mathematics. It is critical that you understand this language, because
Time Value of Money Work book Section I True, False type questions State whether the following statements are true (T) or False (F) 1.1 Money has time value because you forgo something certain today for
22.1 An Introduction to Stocks and Bonds There are many different ways to invest your money. Each of them has different levels of risk and potential return. Stocks and bonds are two common types of financial
CHAPTER 5 INTRODUCTION TO VALUATION: THE TIME VALUE OF MONEY Answers to Concepts Review and Critical Thinking Questions 1. The four parts are the present value (PV), the future value (FV), the discount
Answers to Concepts in Review 1. An investment is any asset into which funds can be placed with the expectation of preserving or increasing value and earning a positive rate of return. An investment can