Making Financial Decisions
Revisiting Budgets
Simple Interest
Compound interest
Appreciation & Depreciation
100
The method by which you plan to spend your money each month
What is Budget?
100
Budgets are called what, because they can change over time?
What is flexible documents?
100
What is the formula to calculate simple interest when interest is calculated once per year?
I = P * r * t
100
What is the formula to calculate compound interest when interest is compounded once per year?
A = P(1+r)^t
100
What is the difference between appreciation and depreciation?
Appreciation is when an asset increases in value over time, while depreciation is when it decreases in value over time.
200
Three factors when considering to make a budget
Needs, Wants, and Savings
200
Jordan’s monthly net income increased by 8%. He decides to revise his budget as follows: Rent stays the same at $900. Utilities increase by $30 (from $220). Food increases by $60 (from $280). Transportation decreases by $40 (from $200). Clothing stays the same at $18. Entertainment increases by $20 (from $90). Originally, Jordan had $130 left over for savings. How much will Jordan now have left for savings per month? By how much did his savings increase or decrease?
Original income: $1,820
New income = $1,820 × 1.08 = $1,965.60
New expenses =
Rent: $900
Utilities: $250
Food: $340
Transportation: $160
Clothing: $180
Entertainment: $110
Total Expenses = $1,940
New savings = $1,965.60 – $1,940 = $25.60
Change in savings = $25.60 – $130 = decreased by $104.40
200
You borrow $200 at a simple interest rate of 6% per year. How much interest will you owe after 2 years?
What is $24? (P*r*t = 200×0.06×2)
200
You invest $200 at a compound interest rate of 4% per year. How much will your investment be worth after 2 years? (Compounded annually)
200 × (1 + 0.04)^2 = 200 × 1.0816 = $216.32
200
A video game is initially worth $60 and appreciates by $30 per year. What is its value after 3 years?
$60 + (3 × $30) = $150
A = 60+3n
n = number of years
A = value of the game
300
Suppose you work in a restaurant. He is being paid an hourly wage, $16.20/hr, and works approximately 6 hours each week. What are your before-tax earnings in one month? Assume a month has 4 weeks.
Let P represent total pay. Let h represent the number of hours worked.
P = 16.20h
P = 16.20(6)(4)
P = $388.80
300
Bella is planning for her summer cruise and has a total budget of $200 to spend on travel items. Here are the options and their costs: Luggage: $150, Swimsuit: $40, Sandals: $55, Sunscreen: $20, Travel-size toiletries: $10, Sunglasses: $25, Beach towel: $15. Which combination of items should Bella choose so she stays within her $200 budget AND is prepared for her cruise?
A) Luggage, Swimsuit
B) Swimsuit, Sandals, Sunscreen, Sunglasses, Beach Towel
C) Luggage, Sunscreen, Sunglasses
D) Swimsuit, Sandals, Sunscreen, Travel-size toiletries, Beach Towel
D) Swimsuit ($40) + Sandals ($55) + Sunscreen ($20) + Toiletries ($10) + Towel ($15)
Total: $140
300
If you invest $700 at a simple interest rate of 4% per year, what will be the total amount (principal + interest) after 3 years?
What is $784? (Interest = 700×0.04×3=84. Total amount = Principal + Interest = 700+84=784)
300
You invest $1,000 at a compound interest rate of 10% per year. After how many years will your investment double to $2,000?
(Round to the nearest whole year; compounded annually.)
A = P * (1+r)^t
2000 = 1000 * (1+0.10)^t
trying for t values: 8 years
300
A computer worth $840 depreciates by 2% per week. Write an equation to represent its value (V) after weeks (t).
Depreciating 2% per week means the value is 98% retained each week, or multiplied by 0.98.
V(t)=840×(0.98)^t
400
You want to buy a video game for $60, but you only earn $15 per week from chores. What is the BEST financial decision to make?
A) Borrow money from a friend and pay them back later
B) Put the game on a credit card right away
C) Save your chore money for 4 weeks and then buy the game
D) Ask your parents to buy it for you
What is save your chore money for 4 weeks and then buy the game
400
What is the correct way to revise your budget if you went over the predicted amount limit?
A) Borrow money from friends or family to cover the difference.
B) Take money from important categories like rent or bills.
C) Adjust spending in other categories to stay within your overall budget.
D) Ignore the overspending and hope it works out next month.
What is C)?
400
Maria wants to earn $90 in simple interest by investing $600. If the interest rate is 5% per year, how many years does she need to invest?
Answer:
What is 3 years?
(Calculation: 90 = 600 × 0.05 × t → t = 3)
400
Maria invests $500 at 6% compound interest per year. How much will she have after 3 years? (Compounded annually)
500 × (1 + 0.06)^3 = 500 × 1.191016 = $595.17
400
The value of a sports card that is currently worth $45 is expected to increase by $10 every year. a) Is the card’s value an example of appreciation or depreciation? b) State whether the card’s appreciation/depreciation is linear or non-linear. c) Build an equation and use that equation to determine how long it will take for the card to reach a value of $300.
a) The card's value is an example of appreciation
b) It is linear
c) let V represent the final value, and t represent the time
V = 10t+45
500
You have a $100 budget to buy a new pair of headphones.
Store A sells them for $85 with free shipping.
Store B sells the same headphones for $75, but charges $10 for shipping and $8 in taxes. Which store offers the better deal, and how much money will you have left over if you choose that option?
What is Store A, and I will have $15 left over?
500
Alex planned to spend $80 on entertainment this month but has already spent $100 with one week left. His original plan included saving $70.
What is the BEST way to revise his budget?
A) Skip savings this month
B) Borrow $50 from a friend
C) Cut back on entertainment for the rest of the month
D) Take money from food and transportation to spend more on fun
What is cut back on entertainment for the rest of the month?
500
John invests money at a simple interest rate of 8% per year. After 5 years, he earns $200 in interest. How much money did he invest?
Answer:
What is $500?
(Calculation: 200 = P × 0.08 × 5 → P = 200 / (0.08 × 5) = 500)
500
Sofia invested $2,000 in an account with an 8% annual compound interest rate, compounded annually.
After how many years will her investment grow to approximately $2,519.42?
A = P (1+r)^t
2519.42=2000×(1.08)^t
t = 3 years
500
Is this graph appreciation of depreciation
What is depreciation?