Budgets
Label each as either Variable or Fixed Expenses:
a) Car Insurance
b) Mortgage
c) Gift shopping
c) Variable
Define Simple Intrest
Paid or received, over a certain period, is a fixed percentage of the principle amount that was borrowed or lent. Paid at the end of each period.
Define Compound Interest
Interest calculated based on both the initial principle value and the accumulated Intrest from previous time periods (Intrest on top of Intrest!)
Bobby was gifted a beautiful painting when he was a child. Now, the artist’s work has gained popularity but they don’t make many pieces anymore. Is this an example of appreciation or depreciation?
Appreciation!
What does the 50/30/20 rule refer to?
50%: Fixed Expenses
30%: Wants
20% Savings
What does the each variable in this formula represent?
I = Prt
I= Interest earned
P= Principle amount (starting amount)
r= Rate of Intrest in % (as a decimal)
t= time
Shaun invests $500 at 6% interest compounded annually. His friend Priya says that in 10 years, his money will double. Is she correct?
Priya is incorrect
After 10 years, Shaun will make $895.42, which isn’t double $500
*Use compound intrest formula*
Does this graph show appreciation or depreciation?
Depreciation!
Would I rather my mortgage for my first home have simple or compound Intrest?
Simple! Pay less yayyyy (This is very out of the normal though)
Which term is referring to the higher amount of money received in a paycheck? EXPLAIN FOR POINTS!
Gross Income or Net Income
Gross Income!
Gross Income: Money made before deductibles (ex. taxes)
Net Income: Money after deductibles (what you take home)
If you invest $160 with an Intrest rate of 18%, how much money will you have in total after 10 years?
$438! *Use I = Prt and solve for I*
I= $288
—> $150 + $288 = $438
You win a prize and have the option to receive:
- $1,500 now and have 5% compound Intrest annually for 6 years
or
- $2,000 in 6 years
Which option is better?
Compound now: $2,010.14 *Using compound formula*
$2,010.14 > $2000.00
Therefore, $1,500!
Does this graph show an example of appreciation or depreciation?
Appreciation!
Define both simple and compound Intrest as Liner or non- linear. Explain.
Simple Interest: Linear
Compound Interest: Non-linear
Olivia gets paid about as a part time worker around $1,500 per month, can she afford her desired life style?
Fixed Expenses Variable Expenses
Rent: $500.00 Eating Out: $150.00
Gas: $150.00 Shopping: $150.00
Cell Phone: $100.00 Movies: $50.00
Car Insurance: $170.00
Groceries: $300.00
Savings: $100.00
Nooooo! She is spending $1,670 per month and only makes $1, 500!!
Frank’s parents put money into a savings account with 7% Intrest rate each year when he was born! He is now 17 and it has earned $595 so far. What was the initial value put in by his parents?
$500!
r= 0.07
t= 17
I= $595 *Solve for P*
Penny invests $1,000 at an interest rate of 6% that is compounded quarterly. How much will she have after 2 years?
$1, 593.85
*Quarterly means 4 times per year!*
t= 4 times per year for 2 year
t= 4 x 2
t= 8
Use A = P(1 + r)t and solve for A!
Mr. Walton purchased a $3900 television that depreciates at a rate of 18% per year. What will be the depreciation over the first year?
$702.00! ($3900 x 0.18)
Name 3 considerations people need to take into account when looking to borrow money from a bank?
List goes on! Is it necessary?, Can current income support payback, Intrest rate, etc.
14 year old Annie gets a job at Tim Hortons in hopes to buy her very own car when she drives at 17. She receives $17.00/hr and works 2 hours at a time, Monday to Wednesday. Will she be able to afford a $10,000 used car at 17?
Yes, she will will be able to afford it. At 17, she will have $15,912 in the bank!
You put $800 in a saving accounts with 5.5% Intrest rate per year. You check on it later, and see it has grown to $1,152. How long ago was the account created
8 years!
$1,152 - $800 = $352
*Use I = Prt and solve for t*
Two best friend invest $1,000 for 3 years:
Bank A: offers 4.8% monthly compounding
Bank B: offers 6.2% annual compounding
Who will have more money after 3 years?
Bank A: t= 3 years x 12 months
t= 36 compounds
AMOUNT= $6, 435
Bank B: AMOUNT = $1,197
Therefore, friend at Bank A will get more money
A cow named Spotty was worth $632,000 5 years ago. Spotty’s value appreciated at 6.4% per year. What is Spotty’s appreciated value today?
$861,837.17 <—- very fancy cow
*use compound formula!*