Financial Decisions Overview

How much interest will your savings account earn in the next year? How much will the payment be on your credit card, your car loan or a home mortgage? What will inflation do to your savings? How should you pay for your stock? These are daily life problems for which mathematics provide custom-tailored models. In this unit, you will become familiar with the mathematics and terminology of financial situations that you will face repeatedly.

Essential Questions

What are some ways you, your friends, or your family have been paid for a job?
What is the difference between simple interest and compound interest?
How does the length of an investment affect the amount of money earned?
What will $1000 be worth in 5 years?
What are the main factors in determining the present or future value of an investment?
How much money do you think you will need for retirement?
Suppose you bought 100 shares of stock 10 or 20 years ago. What would it be worth today?
What kind of credit offers have you seen in advertisements and mailings?
Why is buying a car a losing investment?

Key Terms

The following key terms will help you understand the content in this module.

Annuity - an investment with a sequence of equal payments made at equal time periods.
Bonds - an investment in which a commitment from a company to pay the price an investor pays for the bond at the time it was purchased along with interest payments at a given rate.
Compound interest - interest computed on the original principal as well as on accumulated interest.
Compounding period - the period of time between two interest payments
Installment loans- a loan that you pay off with payments in some time period
Simple interest - only calculated on the principal.
Stocks - an investment based on shares of ownership in a company.

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