1. Financial Management Business Mathematics Alex B 2/11/12 Graduation Project

2. Business Mathematics Methodology and Reasoning I. Survey Results I.Only 1-in-4 of those surveyed answered questions regarding Business Mathematics correctly, compared to the 50% of Economic Awareness and 40% of Financial Literacy. [Approximate values] II.Vastly different from results of other studies – which showed greatest difficulty in Economic Awareness critical thinking and Financial Literacy. Business Mathematics proficiency generally reflected Math proficiency. II.Survey Participant Inquiries I.Focused on topics like credit, budgeting, savings practices, and good habits.

3. Business Mathematics Surveyed Question I Q: Is it possible to make payments on a car without a credit card or established credit? Short Answer: Yes. Long Answer: Yes, there are a few common ways of doing so: I. Co-signing with a family member or relative who has an established credit. II. Through the workplace. Your employer will often have established connections with a financial institution, as many small business owners open their business with an installment loan. Comment: Please, do not buy a car with a credit card. Installment Loans are much more appropriate for large purchases like cars.

4. Business Mathematics Credit and Loans (1 of 2) Credit – reflects the willingness for someone to loan money I. Credit Card No payoff deadline Convenient: anywhere, anytime Highest interest rate of these types II. Installment Loan For large purchases Loan term* can vary from a few months to many years Set payments each month Lower interest rate than credit cards * Long term – the period of time it will take to pay off the loan and interest given the set payments. * Interest – the amount you pay to use someone else's money.

5. Business Mathematics Credit and Loans (2 of 2) III. Student Loan Used for tuition and other college expenses Generally have a grace period*, where you can delay payments till graduation Loan term usually around 10 years, past projected graduation. Interest rate lower than installment loans. IV. Mortgage Used for homes May take an upwards of 15 years to repay Lowest interest of the four examples * Grace Period – For credit cards, it describes the amount of time before you start accumulating interest. In general, it describes an amount of time you do not have to worry about.

6. Business Mathematics Any Questions? LET'S PLAY A GAME! What would I use to buy a...?

7. Business Mathematics Surveyed Question 2 Q: What is the easiest way to save your money? Two possible ways to tackle this question: I. Developing Good Habits II. Following Paved Priorities You can think the first solution as the short-term solution and the second solution as the long-term solution. The purpose of saving money is to be able to satisfy a future goal, so establishing an appropriate plan to reach that goal – in both the monetary and general sense – is necessary. Developing good habits is as simple as not buying that pack of TicTacs on the way out of the gas station. Although, I have more helpful practices on the next slide.

8. Business Mathematics Habits and Planning One classic saying is P.Y.F, or pay yourself first. The idea before doing anything with money you were just given, save a set amount into an account that you will use to meet a future goal. Example: Say your Paycheck after Taxes is $2,100 You'd immediately take $400 from it, and than start planning out how you're going to spend the rest of that for the month. We'll go deeper into the example on the next slide.

9. Business Mathematics Habits and Planning Fixed Expenses: Car Payment: $325 Rent: $750 Internet: $75 Variable Expenses: Utilities & Food: $350 Gas: $100 J.I.C*: $100 Periodic Expenses: Car Insurance ($300/6 Months) $50 Total Expenses: $2,150 *J.I.C – Just In Case: This is basically your secret stash of cash for the month for those TicTacs. Having this as part of your planned expenses will make it easier to ween off the excessive spending. As your better habits develop, you can reduce the amount set aside for J.I.C till its completely removed.

10. Business Mathematics Building a Budget Jessica is a junior in high school. She earns $8 an hour working approximately 25 hours a week at the local grocery store. About 30% of her pay is deducted for taxes. Jessica also earns approximately $15 each month in interest on savings. Jessica still owes money on her used car ($235 a month), but she doesn't pay rent because she lives with parents. She is responsible for the following expenses every month: cell phone ($35-$45), gas ($40-$60), and auto insurance ($50). Jessica typically buys her own clothes and accessories, but receives gifts from her family from time-to-time. One of Jessica's short term goals is to take a trip to visit her grandparents right after graduation. She expects this to cost $1,000, and she has already saved $500.

11. Business Mathematics Surveyed Question 3 Q: What is with number one? I tried both methods I know, and none of the answers come out to the choices. The key to this question was knowing either the Rule of 72 or the equation: Interest = Principal x Interest Rate x Time 72 / Interest = Time How long will it take to double an investment of $2000 with a fixed-interest rate of 6%? 72 / 6% = 12 years Note: I do not consider the Rule of ## Questions on the survey as an accurate representation of the surveyed students ability to actually use them.

12. Business Mathematics Rule of 78 If an installment loan is paid early, a portion of the finance charge is often refunded to the borrower. The method used to calculate the refund is the Rule of 78. This method utilizes the sum of the digits of the number of payments: An example for six payments would be: 1 + 2 + 3 + 4 + 5 + 6 = 21 And for twelve it would be 1 + 2 + 3 + 4 + 5 + 6 + 7 + 8 + 9 + 10 + 11 + 12 = 78 You can also calculate the sum of the digits using the following formula: SOTD = n(n+1) / 2 n = the number of payments. This is used with the Refund Fraction to find the finance charge refund.

13. Business Mathematics Assessment Q: What is the Rule of 72 used for? a. for finding how long it will take to double an investment. b. for calculating refunds to borrows who pay off installment loans early. c. for finding the maximum amount payable by an insurer for loss to the insured. d. for establishing an appropriate replacement value. Q: How long will it take to double an investment of $50,000,000 with a fixed-interest rate of 9%? Q: What must your interest be if you want to double an investment in 4 years? Hint: 72 / I = T