Finance Unit

1
Finance Unit

• Section 1
• Purchasing

2
Comparison Shopping

• Kleen Bore No. 10 Solvent
• 3 1/3 fl oz for 2.28

• Hoppes No. 9 Solvent
• 3 1/3 fl oz for 4.96

3
Unit Pricing

• Considerations
• Quality or performance the same?
• Is one product concentrated (use less)?

4
Unit Pricing

• When the quantities are different

Cost per fl oz 2.45 ? 32 fl oz 0.077 per fl
oz
Cost per fl oz 5.05 ? 72 fl oz 0.07 per fl
oz
Brand A 32 fl oz 2.45
Brand B 72 fl oz 5.05
5
Unit Pricing

• Practice

1.49/ fl oz
0.68/ fl oz
0.59/ fl oz
3 1/3 oz 4.95
0.47/ fl oz
1 pt 10.95
1 qt 18.95
1 gallon 59.95
6
Unit Pricing
1 ounce 28.3 g

• Which is the better deal?

AERKO Freeze P OC and Pepper Stream Spray 4 oz
for 12.95
Pepperball PAVA Pepper Spray 85 g for 15.95
7
Homework

• Practice Set 1
• Page 3, 1-5 (esp. 5)

8
Finance Chapter

• Section 1
• Discounts

9
Discounts 1 of 2
Shipping Table 0.00 14.99 6.95 15.00
49.99 8.95 50.00 99.99 10.95 100 and
above 14.95
Sales Tax Wisconsin Residents pay 5.5 sales tax
on all orders.
Discounts 3 on all orders placed before May 25.
10
Discounts 1 of 2 Solution
Shipping Table 0.00 14.99 6.95 15.00
49.99 8.95 50.00 99.99 10.95 100 and
above 14.95
Discounts 3 on all orders placed before May 25.
Sales Tax Wisconsin Residents pay 5.5 sales tax
on all orders.
11
Discounts 2 of 2
Shipping Table 0.00 14.99 6.95 15.00
49.99 8.95 50.00 99.99 10.95 100 and
above 14.95
Sales Tax Wisconsin Residents pay 5.5 sales tax
on all orders.
Discounts 3 on all orders placed before May 25.
12
Discounts 2 of 2 Solution
Shipping Table 0.00 14.99 6.95 15.00
49.99 8.95 50.00 99.99 10.95 100 and
above 14.95
Discounts 3 on all orders placed before May 25.
Sales Tax Wisconsin Residents pay 5.5 sales tax
on all orders.
13
Homework

• Practice Set 2
• Page 6, 1 2

14
Order Blank from GT Distributors
15
Cash Discounts
GT Distributors Invoice for Beloit Police
Department Terms 2/10 n/30 Item Total
459.85 Shipping 24.95 Grand Total 484.80
Terms 2/10 n/30
Discount 9.20, Grand Total 475.60
16
Cash Discounts
GT Distributors Invoice for Lancaster Police
Department Terms 1.5/10 n/30 Grand Total
783.99 (Includes shipping of 45.99)
Discount 11.07, Grand Total 772.92
17
Homework

• Practice Set 3
• Pages 8 9, 1 - 4

18
Finance Chapter

• Section 2 - Saving
• Simple Interest and Compound Interest

19
Simple Interest

• Used for
• Billing purposes
• Informal loans
• Amortization Schedules (Interest Owed each month

Loan Bill loans his sister 500 at 4 interest
for 8 months.
Invoice Balances unpaid after 30 days are subject
to a 12 (1 monthly) finance charge.
Amortization Schedule 85,000 borrowed at 6.35
interest for 30 years. MP 528.90 1st Months
Interest 449.79
20
Simple Interest Formula

• I PRT
• P is the __________
• R is the __________
• T is the __________

21
Using the Simple Interest Formula

• Invest 580 at 3 simple interest for 4 years

I PRT
22
Using the Simple Interest Formula

• Invest 350 at 2.25 simple interest for 2 years
  9 months.

I PRT
23
Using the Simple Interest Formula Breakdown over
4 years

• Invest 580 at 3 simple interest for 4 years

580 x .03 x 1 17.40 580 x .03 x 1
17.40 580 x .03 x 1 17.40 580 x .03 x 1
17.40
69.60
24
Compound InterestBreakdown over 4 years

• Previously earned interest earns interest

580 invested at 3 interest compounded annually
for 4 years.
580.00 x .03 x 1 17.40 597.40 x .03 x 1
17.92 615.32 x .03 x 1 18.46 633.78 x .03 x
1 19.01
72.79
25
Compound Interest

• How much money would you have if you invested
  500 at 4 interest compounded daily for 10 years?

26
Compound Interest Formula

• The compound interest formula

27
Compound Interest
1 of 3

• 250 invested at 2 compounded quarterly for 3
  years.

T 265.42
28
Compound Interest
2 of 3

• 600 invested at 3 compounded monthly for 5
  years.

T 696.97
29
Compound Interest
3 of 3

• 400 invested at 1.5 compounded daily for 2
  years.

T 412.18
30
Homework

• Practice Set 7
• Page 26, 1-5

31
Finance Chapter

• Section 2
• Saving Rule of 72

32
Rule of 72

• How long will it take my money to double?

Start with 500 and deposit it in an account that
pays 3 interest. How long will I have to leave
the money in the account so that it doubles to
1000?
72 ? Interest Rate Doubling Time
33
Rule of 72

• How long will it take for a 100 investment to
  double in size if the interest earned is 5?

72 ? Interest Rate Doubling Time
34
Homework

• Practice Set 8
• Pages 27 28, 1-3

35
Finance

• Section 2 Saving
• Investments and IRAs

36
Investments

• Regular Savings Account
• Easy to use
• Liquid
• Safe (FDIC Insured up to 100,000)
• Federal Deposit Insurance Corporation
• Low interest rates

37
(No Transcript)
38
Investments

• Certificates of Deposit (CD)
• FDIC-insured
• Higher Interest
• Money is placed into the account for a set amount
  of time. (3, 6, 9,12 months and up to 5 years.)
• Require a minimum deposit.
• Money removed before maturity is subject to a
  penalty.

39
(No Transcript)
40
Investments

• Money Market Accounts
• Higher interest rates
• Can be variable
• Can write checks from the account
• Fees
• Balance ? minimum
• Write too many checks

41
(No Transcript)
42
Investments

• Bonds
• Loan to the government ,corporations, schools
  municipalities
• Fixed amount of interest to be paid over a
  certain amount of time.
• Collected _at_ Maturity
• Buy or Sell at anytime
• Less risky than buying stocks
• Avoid state or local taxes on certain types

43
Individual Retirement AccountIRA

• Traditional IRA
• Reduces your taxable income
• Withdraw at 59 ½ years old

Without IRA Income 30,000 Tax Bracket
28 Taxed Owed
With IRA Income 30,000 IRA Contribution
3000 Taxable Income Tax Bracket 28 Taxed
Owed
44
IRA

• Income 45,000
• IRA Contribution 4,000
• Tax Rate 32
• Tax saved by having IRA _________

45
Homework

• Practice Set 9
• Page 30, 1 - 7

46
Finance

• Section 3
• Borrowing Money

47
Borrowing

• Student Loans
• Car Loans
• Home Loans
• In-store Loans
• Buying on Time

48
Why Borrow?
49
Borrowing
50
Buying on Time

• 350 cash
• 50 down payment, then 35/month for 1 year.

Buying on Time 50 35(12) 470
51
Homework

• Practice Set 11
• Pages 36 37, 1 and 2

52
Finance

• Section 3
• Borrowing - Loans

53
Loans

• Loan

• Amount Borrowed

COST
2) Interest Rate
3) Term
54
Loans

• Monthly Payment
• Table (p. 56)
• Interest Rate, Term, Amount Borrowed

1) Monthly Payment 2) Total Amount Paid on the
Loan 3) Total Amount of Interest Paid
55
Loan Table
Monthly Payment Required to Amortize a 1,000 Loan
Time (years)
Interest Rate
56
Loan Problem 1 of 2

• What are the monthly payments on a 4,000 loan at
  6 interest for 3 years?

57
Loan Problem 2 of 2

• What are the monthly payments on a 15,000 loan
  at 6.5 interest for 5 years?

58
Analysis

• Amount Borrowed
• Interest Rate
• Term

59
Analysis

• Borrow 45,000

912.60
869.85
1,098.45
54,756
52,191
52,725.6
9,756
7,191
7725.60
60
811.20
48,672
3,672
61
Strategies to Save

• Down Payment
• Lower Interest Rate
• Shorten the Term

COST
62
Homework

• Practice Set 12
• Pages 41 and 42, 1-7

63
Finance

• Section 3 Loans
• Amortization Schedules

64
Payment

• 100,000 loan _at_ 5 interest for 30 years.
• Monthly Payment of 536.82

1st payment of 536.82
100,000
-120.15
99,879.85
Interest 416.67
Principle 120.15
65
Payment

• 100,000 loan _at_ 5 interest for 30 years.
• Monthly Payment of 536.82

180th payment of 536.82
67,884.34
-252.92
67,631.42
Interest 283.90
Principle 252.92
66
Amortization Schedule
How much of your first payment goes toward
interest?
How much goes toward the principle?
67
Amortization Schedule
By the last payment, how much is interest?
How much goes toward the principle?
68
Amortization Schedule
After six months youve made payments totaling
_________
69
Amortization Schedule
Of that amount, how much goes toward the
principle?
How much goes toward interest?
70
Amortization Schedule
After making payments for 1 year, you still owe
_________
71
Finance Chapter

• Section 3 Loans
• Making an Amortization Schedule

72
Amortization Schedule

• Make an amortization schedule for this situation
• Borrow 21,000 _at_ 7 interest for 5 years.

Step 1 Monthly Payment is __________
Next
73
Amortization Schedule

• Make an amortization schedule for this situation
• Borrow 21,000 _at_ 7 interest for 5 years.

Monthly Payment 415.80
74
Amortization Schedule

• Fill-out the amortization schedule
• Borrow 70,000 _at_ 6.5 interest for 20 years.

Step 1 Monthly Payment is __________
75
Homework

• Practice Set 14
• Page 48, 2

76
Finance

• Section 3 Loans
• Payment Strategies

77
Payment Strategies

• Reduce Amount Borrowed
• Lower Interest Rate
• Shorten Term
• ___________

78
Extra Principle Payments

• 125,000 borrowed at 5.9 for 30 years.
• Monthly Payment 741.42
• Strategy Pay an extra 25 per month

• Result
• Save 13,930 in interest charges
• Loan is paid off 30 months (2.5 years) ahead of
  schedule.

79
Extra Principle Payments

• 125,000 borrowed at 5.9 for 30 years.
• Monthly Payment 741.42
• Strategy Pay an extra 50 per month

• Result
• Save 25,093 in interest charges
• Loan is paid off 54 months (4.5 years) ahead of
  schedule.

80
Full Extra Principle Payments
1st payment __________ 2nd payment__________ 3rd
payment__________ Interest Saved after 3
payments__________
81
Full Extra Principle Payments
1st payment __________ 2nd payment__________ 3rd
payment__________ Interest Saved after 3
payments__________
82
Homework

• Practice Set 15
• Page 52, 1 2

83
Quizzes

• Quizzes 1 3
• Pages 57 through 64