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## Unit 4 Part B Finance

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**Unit 4 Part B Finance**Experts: Aarushi Aggarwal, Gurleen Bajwa, RajdeepGalsi, & NupurSehrawat**Thought of the Day:**When I was young I thought that money was the most important thing in life; now that I am old I know that it is.**MONEY!! MONEY!! MONEY!!**Key Concepts: Simple Interst Compound Interest/ Present Value Future Value of an Annuity Present Value of an Annuity**Our Little Story……..**This is a story about a young, lovely women who loved to shop for big things like cars, TV’s, and Home Décor she is Ms. Habibzadah…….....……………… Where did the money come from you ask???**Simple interest**Simple Interest Interest is earned (or paid) on the principal amount (invested or borrowed) only. Formula: I = Prt i = interest on the amount P = principle amount r = interest rate (as a decimal) t = time (in years)**Example #1**As a punishment Ms. Habibzadah took $2 from each student who talked during her lessons. After the semester she decided to make some more money, so she invested $2,000 in a bank account with an interest rate of 9.5%. She wanted to see how much interest she has after 5 years of collecting money from her students? Answer: $905**Compound Interest/Present Value**Interest is earned on the principal and previously accumulated interest. Earning interest upon interest. Formula : A = P(1+i)^n A=Accumulated Amount P = principal i = interest rate n = number of compounding periods per year**Example #2**After Ms. Habibzadah earned $2,950 from her talkative classes she decided to by herself a flat screen LED TV from Gurleen’s Electronics. Gurleen’s Electronics charges 5% interest rate compounded bi-weekly for 3 years. What is the accumulated amount Ms. Habibzadah has to pay Gurleen? Answer: $3,420.77 Gurleen’s first costumer in 5 years was Mrs. Habibzadah**Future Value of an Annuity**Putting in small lumps of money at regulars intervals, to have a big amount of money at the end. Formula: A= R[(1+i)^n-1] i A= Accumulated Amount R= Regular Payments i= interest rate n= compounding number of years**Example #3**After, Ms. Habibzadah bought her flat screen TV she thought about re-designing her house. So she needs and extra $5,000 at the end of 4 years from her talkative students. The Designer Charges 2% compounded monthly for 4 years. How much money does she need to deposit on a regular basis? Answer: $24**Present Value of an Annuity**The amount of money needed to finance a series of regular withdrawals. Formula: PV= R[1-(1+i)^-n] i PV= Present Value R= Regular Payments i= Interest Rate n= Number of Compounding Periods**Example #4**After, Ms. Habibzadah got her house re-decorated, she wanted to buy a new car, so therefore she earns another $100,000 from her new students next semester. She earned this money with an interest rate of 10%, compounded quarterly, for 6 months. How much money did she deposit quarterly? Answer: $52,083.33**The Ending!**Mr.Remtulla finally caught onto her scheme after he saw her brand new car pull onto school property. OHHHHH NOOO Ms. Habibzadah was in TROUBLE!!!! However, Mr.Retulla was like this is a good idea…. “Count me in!!” LOL**The amount of money needed to finance a series of regular**withdrawals. The amount of money needed to finance a series of regular withdrawals. The amount of money needed to finance a series of regular withdrawals. The amount of money needed to finance a series of regular withdrawals. GAME TIME!!!!**The amount of money needed to finance a series of regular**withdrawals. The amount of money needed to finance a series of regular withdrawals. The amount of money needed to finance a series of regular withdrawals. The amount of money needed to finance a series of regular withdrawals. Question #1 Nupur deposits $700 in to an account that earns 7% simple interest annually for 3 years. How much interest did she earn? a) $400.00 b) $490.00 c)$390.00 d) $250.00**Question #2**Gurleen withdraws $400 at the end of each month for 5 years at 5% per annum compounded monthly. a) $20,978.24 b) $21,200.22 c) $21,194.22 d) $24,789.54**The amount of money needed to finance a series of regular**withdrawals. The amount of money needed to finance a series of regular withdrawals. The amount of money needed to finance a series of regular withdrawals. The amount of money needed to finance a series of regular withdrawals. Question # 3 Aarushi invest $1700 in Rich People’s Bank that ears 6.5% interest per year, compounded monthly for 5 years. a) $2348. 45 b) $2456.90 c) $2587.78 d) $3287.78**The amount of money needed to finance a series of regular**withdrawals. The amount of money needed to finance a series of regular withdrawals. The amount of money needed to finance a series of regular withdrawals. The amount of money needed to finance a series of regular withdrawals. Question #4 Rajdeep takes out a loan for $680 at an annual rate of 6.98% simple interest. When she repaid the loan, the amount was $1267. How long did Rajdeep hold this loan? a)$26.90 b) $26.80 c) $26.70 d) $26.60**The amount of money needed to finance a series of regular**withdrawals. The amount of money needed to finance a series of regular withdrawals. The amount of money needed to finance a series of regular withdrawals. The amount of money needed to finance a series of regular withdrawals. Question #5 Nupur wants to withdraw $658 per month for the next 54 years. The interest in her account is 5.67% per annum, compounded monthly. How much should she invest today to make these monthly withdrawals? a) $132,789.30 b) $129, 123 c) $126,987.90 d) $132,694.29**The amount of money needed to finance a series of regular**withdrawals. The amount of money needed to finance a series of regular withdrawals. The amount of money needed to finance a series of regular withdrawals. The amount of money needed to finance a series of regular withdrawals. Question # 6 Gurleen and Aarushi, are both 17 years old, they are planning to save up for an apartment which will come in handy when going to university. Determine how much money they save if they save $700 every 5 months at 7% per annum compounded bi-weekly. a) $234,987.12 b) $67,987.90 c)1$36,890.45 d) None of the above**The amount of money needed to finance a series of regular**withdrawals. The amount of money needed to finance a series of regular withdrawals. The amount of money needed to finance a series of regular withdrawals. The amount of money needed to finance a series of regular withdrawals. Question # 7 Rajdeep needs $ 6785 for her university tuition, when she graduates in a 2 years. She plans to make deposits into an account that earns 8.67% per year, compounded quarterly. How much should she deposit quarterly? – future value of an annuity a) $267.02 b) $245.98 c) $786.42 d) $678.34**Quote of the Day:**The lack of money is the root of all evil.