MATH 125 Unit 2 Individual Project

MATH125: Unit 2 Individual Project

Ebony Hill

6500 (0.25) *2 = 3250

1. Question 1: CONSUMER CREDIT
   • Assume you bought new appliances for your newly renovated home. Based on the first letter of your last name, choose the total value of the appliances that you have purchased. This will be denoted by P. It does not necessarily have to be a whole number.
   • Choose an interest rate between 22% and 26%. This will be denoted by r.
   • Suppose you forget about the bill and pay it 1 day late. How much interest do you pay if the store charges you simple interest?Because this is a dollar value, round your answer to the nearest cent. (Assume t=2 years.)

   T= 3,250

   Simple interest is calculated by multiplying the principal amount by the interest rate and the number of periods in a loan.

   1. How much is your total bill—the total value of the appliances plus the interest? Round your answer to the nearest cent.
      • 6500+3250-9750
      • Total Bill 9,750
      • How much is your total bill if, instead, the store charges you interest that is compounded daily? Use 6 digits on your intermediate calculations, and round your final answer to the nearest cent. (Assume t=2 years.)
      • 10714.85 +6500 =17,214.85
      • How much interest do you pay if it is compounded daily? Round your answer to the nearest cent.
      • A=p (1+r/n) n^2
      • A= 65009 (1+0.25/365) ^365^2
      • A= 6500 (1+0.0006)730
      • 8.5 =1.000714
      • 10,714.85
      • Based on the result of your calculations, write a summary about the difference between simple and compound interest.

   Compound interest is calculated by multiplying the principal amount by one plus the annual interest rate raised to the number of compound periods minus on.

   Simple is better to pay

   Question 2: Saving for Your Retirement

   1. Do you think a deferred billing option is helpful for shoppers? Explain your answer.
      • Deferred billing will be good for a shopper if they follow rules. If they can pay on time then they will be fine if they miss a payment they will have to pay more .

   

   Future Value, F

   $437,020

   Time, t

   39

   First letter of your last name	Possible values for r
   H	8.00%

   Annual interest rate in decimal form, r

   0.08

   Compounding Period	n
   Yearly	1

   Compounding period, n

   1

   Interest rate per compounding period,i

   0.08

   437020*0.08/ (1+0.08)^39-1

   1. Suppose your goal is to have a lump sum that you can withdraw when you retire. To accomplish this, you decided to contribute a portion of your paycheck in an annuity.
      • Using the AIU Library or the Internet, readabout what kind of expenses you will be faced withwhen you retire. Write a brief summary of your research.
      • Based on your research, state the lump sum, in U.S. dollars, that you want to have when you retire. This is the future value of your investment;denote it byF.
      • State the time, in years, that you plan to contribute to your retirement account. Denote this byt.
      • Based on the first letter of your last name, choose the annual interest rate for your retirement account. Denote this by r,and you will convert this to its decimal form. It does not necessarily have to be a whole number.
      • From the table below, choose how many times per year you want to contribute to your retirement. Denote this by n, and this will also be your compounding period.
      • Calculate the interest rate per compounding period, which you will denote by i, by dividing the annual interest rate from #4by the compounding period from #5, (i.e.,
      • . Round your answer to 6 decimal places.
      • Your contribution per period, which you will denote by C, to this retirement account is calculated using the following

   1.08^39

   437020*1.08

   19.1152

   34961.6/19.1158

   =1,828.99

   TC= 1,828.99(1)(39)

   1. Using the values that you have chosen for F, i, n, and t, calculate your contribution per period. Use six decimal places for your intermediate calculations, and round your final answer to the nearest cent.
      • NOTE: Make sure to review exponents and the order of operations from College Math Chapter
      • Calculate your total contribution to this retirement account, which you will denote by TC, by using the formula TC = C x n xt.

   TC= 71,330.61

   Its important to work on your retirement because you can’t rely on Social Security, money is needed to continual to pay bills while you don’t work

   1. What can you say about the difference in value between your total contribution (TC) and the lump sum (F) that you will receive? Based on what you have learned in this unit, is there a term that is usedfor this difference?
      • My total contribution of 71,330.61 won’t be enough to get my lump sun
      • Summarize the results of your calculations, and explain why it is important to prepare for your retirement.