1 / 21

IB Math Studies – Topic 8

IB Math Studies – Topic 8. Financial Mathematics. IB Course Guide Description. Introduction. Vocabulary : Currency – money Exchange Rate – establishes a relationship between the value of currencies. These are constantly changing. Conversion – exchanging/converting currencies.

kirby
Download Presentation

IB Math Studies – Topic 8

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. IB Math Studies – Topic 8 Financial Mathematics

  2. IB Course Guide Description

  3. Introduction Vocabulary: • Currency– money • Exchange Rate – establishes a relationship between the value of currencies. These are constantly changing. • Conversion – exchanging/converting currencies. • Commission – amount/percentage made by exchanging agency

  4. Percentage increases and decreases Both: Divide the resulting amount by 100 and multiply by the amount you wish to increase or decrease • To increase a percentage • Add the percentage on to 100 • To decrease a percentage • Take away from 100

  5. Reciprocals • You can use proportions to solve currency conversion questions Example: 1 GBP = 1.80 US $ Cross multiply and divide. x = 0.56 GBP

  6. Commission • Banks and other currency traders earn a commission for exchanging currency. • Commission rates are usually between 0.5% to 3% • If there is no commission, then the exchange rates will be worse

  7. Examples Questions of Commission

  8. Examples Questions of Commission • Converting 500 UK pounds to US dollars were 1 UK pound buys $1.8734 US • Commission: • Customer receives: • Converting 350 UK pounds to euro where 1 UK pound buys $.5071 euro • Commission: • Customer receives: 7.50 pounds $923 US 5.25 pounds 175 euros

  9. Interest • There are two types of interest: simple and compounded. Simple: Compounded:

  10. Simple Interest - Examples • What flat rate of interest does a bank need to charge so that €5000 will earn €900 simple interest in 18 months? • How long will it take $2000 invested at a flat rate of 12.5% p.a. to amount to $3000?

  11. Compound Interest

  12. Compound Interest - Continued

  13. Compound Interest - Examples

  14. Compound Interest - Examples • $5359.57 • $7293.04 • 9300.65 pounds • 113.40 euro • $1170.26 • $6663.24

  15. Repayment • Repayments are often made in regular payments over the length of the loan. • These may be weekly, fortnightly, monthly or another period of time. • Calculate the interest • Calculate the total amount to be repaid (capital + interest) • Calculate the total number of payments • Determine the amount of a regular payment Calculating Repayment

  16. Repayment - Examples

  17. Repayment - Examples • $274.84 • 787.50 baht • $1418.75

  18. Loan and repayment table

  19. Example • Francine takes out a personal loan for $ 16 500 to buy a car. She negotiates a term of 4 years at 11.5% p.a. interest. • Calculate the monthly repayments

  20. Check your answers • From the table, the monthly repayments on each $1000 for 4 years (48 months) at 11.5% p.a. = $26.0890 • Repayments on $16 500 = $26.0890 x 16.5 (16.5 lots of $1000) = $430.4685 = $430.50

  21. Inflation • Inflation is the increase in prices of goods and wages • If inflation rate is constant over a number of years, we can use compounded interest Example: In a period where inflation is running at 5, find the price of a television that originally costs $450 after 4 years. = 450= $546.98

More Related