Dr. Sarah's Finance Review Sheet

Write down the setup of the formula with numbers, explain why (in words) the formula you chose applied to this problem, solve the problem on your calculator, and write down "math common sense" - did your answer make sense or not and WHY?: For example, "we have seen that it is possible to double your money in about 20 years because it is sitting there a long time", or "it makes sense that the interest on the loan is more than the loan itself since the bank is loaning us a large lump sum up front, and we are taking a long time - 30 years - to pay it back. The bank could have deposited their money in a lump sum account instead of loaning it to us, and the money would have more than doubled in this account. Hence, we must pay back more than double the interest."

Problem 1
• If I put in \$350.00 in an account compounding monthly at 6.5%, how much do I have at the end of 5 years?
• How much should I have put in if I'd wanted to end up with \$5000 at the end of 5 years, assuming that I compound monthly at 6.5%?
• If I put in \$350 in an account compounding monthly at 6.5%, how long will it take for the money to reach \$100,000? Setup and understand common sense, but do not solve.
• If I put in \$350 in an account for 5 years, what interest rate, compounded monthly, would have resulted in earnings of \$3000? Setup and understand common sense, but do not solve.

Problem 2
• If I put in \$350 each month into an account compounding monthly at 6.5%, how much do I have at the end of 5 years? How much did I put in total? How much interest did I earn?
• How much should I have put in each month if I'd wanted to end up with \$5000 at the end of 5 years, assuming that I compound monthly at 6.5%? How much did I put in total? How much interest did I earn?
• If I put in \$350 each month in an account compounding monthly at 6.5%, how long will it take for the money to reach \$100,000? Setup and understand common sense, but do not solve. Given the answer, how would I calculate how much I put in total and how much interest I earned?
• If I put in \$350 each month for 3 years, what interest rate, compounded monthly, would have resulted in earnings of 15,000? Setup and understand common sense, but do not solve.

Problem 3
• I'm going to buy a 30,000 car and finance it at 6.5%, compounded monthly. I'll put 10% down and take out the remainder as a loan.
-How much do I need to take out as a loan?
-How much do I need to pay each month if my loan is for 5 years? How much did I put in total over the life of the loan? How much total interest do I pay over the life of the loan?
-How long is my loan period if my monthly payment is actually \$100 a month? Setup and understand common sense, but do not solve!

Additional Study Suggestions Review the What is Math reading from Feb 10 - Mon (see the main page). Review the Jane and Joan sheet, the Condo lab and WebCT quizzes 1 and 2. For the WebCT quizzes, be sure that you could explain WHY each answer is true or false. You can click on your previous WebCT tries as I showed you in class. Be sure that you could explain information given on a student loan statement or an Excel amortization table (see class notes, condo lab chart and Paying extra each month on option 1, web based problems 1 and 2, and the student loan work as a review of this), and that you could relate that information to by-hand formulas that we have used and answer questions on it. You will not be tested on Excel formulas such as =B3*\$c\$2, but you might be asked how to write down how you would get a number in an excel box using by-hand formulas, or you might be asked to use a portion of an Excel table (and your knowledge of how it works) in order to answer questions.