Financial Math Study Guide Notes #6

Financial Math NotesConsumer CreditIdentify the costs, benefits, and sources of various types of credit.Credit Card: It is convenient and, if gotten from reliable sources, does not have insane interest rates.Credit from your friends: You don't have to go through any hoops to get credit from friends, but they may scam you out of ur money.Mortgage: Loan to buy house. It may be hard to get a mortgage if you have a bad credit score.Calculate sales tax and computer total price with sales tax.(og price)*(sales tax)+(og price)=(price u pay)Compute total purchase price with interest/finance charges added(price)+(charge and/or interest)Compute the costs involved in owning and buying an item such as an automobile, appliances, home, or furniture.Money needs to be paid to get the items. A loan may be taken out, but you need to pay loan w/ added interest.Compute finance charges for single payment loans.(loan)+(interest). The loan is paid in one large payment.Calculate installment loan costs such as amount financed, installment price, finance charge, and installment payment.(finance charge)+(amount financed)^(1.interest)-x(installment payment)Find the estimated annual percentage rate (APR) using a table.APR = ((Interest + Fees / Loan amount) / Number of days in loan term)) x 365 x 100.Compare costs of leasing and buying.The cost of leasing goes up over time as you need to pay them money every so often. You pay a bigger price upfront for buying but then don't pay any more money afterwards.Find the finance charge and new balance using the average daily balance method.Add up every day's balance and divide by total # of days. Multiply by 1/12 of APR to get a monthly finance charge.Read amortization tables to determine payment, interest and balance.They usually have labels on top to tell you which is which.Compute Annual and monthly Percentage Rate for credit cards or loan.Divide APR by 12 to get the monthly rate.Find the monthly mortgage payment.Find monthly interest rate. Multiply that number by your loan.Find the total interest on a mortgage and the PITI.Principal loan amount x Interest rate x Loan term in years = Interest. Some of the values in PITI should be given to you or else you can't solve the question.Prepare a partial amortization schedule of a mortgage.Payments will be made on a regular basis that is longer than the loan term. A balloon payment may be used.Compare the total interest paid on a 15-year and 30-year fixed rate mortgage.Assuming same interest rates and principal, the 30 yr loan will accumulate more total interest than 15 yr loan.Define and compare the interest only, fixed rate, and adjustable-rate loans.Interest only: u first pay for interest, then the $ u borrowed.fixed rate: same repayment amount every time until ur debt is gone.adjustable-rate loans: interest rate changes w/ associated financial index.Data Analysis and ReportingUsing a data set, determine mean, median, and mode.mean: add up everything and divide by amount of added values.median: line up all the numbers and find the middle number.mode: find the most common number.Distinguish between a simple average and a weighted average and calculate each.Simple avg is same as mean. Weighted avg is mean but u multiply the numerator values with their weight.Identify and construct various types of graphs and charts.bar chart, box plot, graphs, pie chart, data table, Venn diagrammake sure to label and number the axis.Compile and arrange facts in organized manner for a table, chart, or figure.use a spreadsheet or something draw a table/chartExplain or prepare written summary of findings expressed in tables, charts, graphs and figures.CUSS+contextMake predictions and decisions based on data and communicate their reasoning.you can make inferences from your data but extrapolation is bad. lots of ways to communicate something, writing and talking. Add evidence from ur data.Explain the usage of statistics, probability, and systems of measurement in business.They are all used to make sense of trends in business so you can make better decisions. Systems of measurement can be used to deceive other people so you get more profit.Interest RatesFigure rates, interest, and proceeds of bank discounts.figure rate: Percent amount of a thing that is discounted when it is sold at a lower value.interest: Difference between face value and purchase value.proceeds: The amount of money a person gets for buying something.Calculate simple interest using the simple interest formula.A=P(1+rt)Calculate any single variable – principal, interest rate, amount of interest, or time – given the other three.Isolate a variable and solve for it.Explain the process of discounting a promissory note and calculate the proceeds of a discounted promissory note.Interest isn't included on principal at the start of that loan. Multiply discount rate, discount period, and maturity value together and divide the product by 360.Define maturity value and find the maturity value of a loan.Maturity value is the amount of money to be paid at the end of a loan. It can be found by adding the total interest to the total principal.Convert months to a fractional or decimal part of a year.(months)/12 and convert to decimal if necessary.Find the future value and compound interest by compounding manually.principal*1.(interest) After finishing the calculation, use the answer as principal for the next calculation. Repeat until the amount of calculations equal number of compounding periods.Find the interest compounded daily using a table.Do some magic on spreadsheets and numbers will appear. I think write an equation or something and add a list/column of values to be fed into the equation to get interest.Mark-ups and DiscountsIdentify the various types of discounts.0 to 100% discount on stuffbuy x get y freebuy x get y at some percent offbundlingCalculate chain, trade, and cash discounts and net selling price of each kind of discount.bruh idk there isnt any concrete numbers for me to go off of and i dont think some of these discounts fit the category. Anyhow, u generally multiply the discount to the price, like 打八折等于卖的价钱乘零点八。Determine price of product after coupons and/or rebates.og price multiplied by 1-how much percent off.Define and calculate markup and markdown.how much price has gone up or down. same calculation as coupons and stuff igDetermine the rate of the markup or markdown.up=(sellprice-cost/cost)*100down=(ogprice-saleprice/ogprice)*100Find the cost, markup or selling price when any two of the three are known.just do algebra smhFind the amount of markdown, the reduced price and the percent of markdown of an item.do algebra againCalculate markup based on cost.uprate=(sellprice-cost/cost)*100Calculate markup based on selling price.markup=(sellprice-cost/sellprice)*100Convert markups from cost to selling price or from selling price to costs.do algebra to convert values w/ a formula PayrollCalculate pay based on piecework, salary, commissions, and graduated commissions.piecework & commision: amount of items u complete * pay per item completedsalary: time worked * pay per timeCalculate gross pay based on an hourly wage with an overtime policy.wageup to x hours + new wagemore than x hoursCalculate an employee’s net earnings per paycheck.paycheck-taxes and other deducationsPrepare an individual payroll or earnings record.record name, id, and other info.record time period.record gross pay, deductions, and resulting net pay.Find federal tax withholding per paycheck using IRS tax tables and IRS percentage method.withhold amount=base amount+(amount above threshold)*(percent rate)Calculate Social Security Tax and Medicare tax per paycheck.tax=gross wage * tax percent of the thing ur taxing forFind an employer’s total deposit for withholding tax, social security tax, and Medicare tax per pay period and quarterly.tax=gross wage * tax percentCalculate federal and state unemployment taxes.tax=sigma(taxable wage * tax rate)Compute business expenses related to employees: benefits, disability insurance, travel, and employee training.benefit: depends on the type of benefit, could be fixed amount or ratedisability insurance: short and long term, replaces x% of income.travel: either covers all costs or x% of costs or only some aspects of the costs of travel.training: Companies usually pay for the cost of training.InvestmentsDefine investment terms such as risk, yields, P/E ratio, and rate of return.risk: How likely you will lose money.yields: How much return ur investment makesP/E ratio: price of a stock compared to its earningsrate of return: net gain or loss over a period of timeExplain the effect compounding has in an investment and lending environment.Interest is applied to the original amount and the newly added amount, so your investment and debt will go up quicker if there is compounding.Compare investment decisions and make mathematical comparisons of investment alternatives.Bonds are more safer than stocks, but stocks have more potential to pay back big money. Mathematically speaking, bonds are like randomly distributed values with a small standard deviation while stocks are randomly distributed values with big standard deviation.Calculate the net present value of an investment such as certificate of deposit, savings account, stocks, and mutual funds.Use the NPV formula to find the various aspects of investment.Determine stock yield, earnings per share, and price-earnings ratio.yield: (annual dividend per share/current stock price) * 100earning per share: (net income-preferred dividends)/avg sharep/e ratio: current price/earning per shareCompute the anticipated rate of return on specific investments and savings accounts using various factors such as simple or compound interest, dividends, fees, etc.Get the principle and add the correct amount of interest to it. Next subtract the total fees. Divide by the number of people the investment will be split between.TaxesDefine tax terms such as standard deduction, itemized deductions, exemptions, and various types of taxes such as income tax, sales tax, and property tax.standard deduction: fixed amount that gets takenitemized deduction: alternate deductions if not pay standard deductionexemption: stuff gets subtracted from taxable incomeincome tax: tax on a person's incomesales tax: tax on services and goodsproperty tax: tax on buildings/landDefine and calculate property taxes based on local percentages/guidelines.Property tax = property value * tax rateCalculate sales tax on purchase.sales tax = item's price * sales tax rateComplete a 1040 EZ Federal Income Tax Form with a W2 form.Doing so will not provide any benefits except possibly for archival/historical purposes due to the fact that the govt discontinued the 1040ez form in 2018.Prepare a 1040 A using W2 and 1099 Interest form.Doing so will not provide any benefits except possibly for archival/historical purposes due to the fact that the govt discontinued the 1040a form in 2018.Complete basic tax forms such as W2 and W4.Fill out employee information.Fill out wages/income section.Fill out taxes.Fill out deductions and exemptions.Fill out your local and state info.add ur signature.Bank RecordsCompare different types of banking options such as credit unions and other banks.Credit unions have lower fees and more personalized service while banks offer more services, tools, and accessibility. Identify the types of banking services and their costs for meeting various needs.Deposit accounts allow you to hold money in a bank and earn some interest.Credit services allow you to borrow money from the bank.Banks can help broker stonk and bond purchasing and selling.Also offer services for retirement and businesses.Write a check, prepare deposits, and prepare withdrawal slips.Check: date, payee, payment amount, memo, signatureDeposit: date, account info, deposit, money amounts, signaturewithdrawal: date, account info, amount, signature, IDMaintain a check register including proper procedures for ATM and automatic payment withdrawals.Columns: date, check number, description, debit & credit, balanceATM: date, location, purpose, amountAuto payment: date, name, amountReconcile a bank statement.check opening balance, match deposits and withdrawals, record missing transactions, identify outstanding transactions, calculate new balance, investigate discrepanciesUtilize online banking and bill payment options securely.Strong passwords, 2FA, secure connections, regular monitoring, beware of scams, update software, remember to log outInsuranceIdentify and compare types of insurance.Health insurance: Help to pay medical bills when you get hurt.Life insurance: Other people will get money when you die.Automobile insurance: protects your car.home insurance: help pay for repairs if your house gets damaged.pet insurance: help pay for your pet's medical bills.Read insurance premium charts and determine the cost of a particular policy.Read the face value of the policy, rate of coverage, and type of policy. To get the premium first get the number of units, such as the number of 1000 units, and then multiply by the rate.Analyze insurance proposals for auto and determine the cost of compulsory insurance and costs of optional coverage.While compulsory insurance is required by law, you can also get additional insurance to pay for other stuff when your car gets damaged. Some of those include insurance for collision, injury, and roadside assistance.To get the total amount of insurance paid, add the compulsory insurance with the optional insurances and then add on any fees that are present.Analyze health insurance premiums and calculate based on selected options.Some factors that affect the amount of premium are age, plan type, location, and employer. To get total premium paid, add the basic insurance premium with the premiums from any extra options that you chose.Compute the costs and benefits of specific insurance plans.Insurance plans usually have a basic premium price with extra money added to premiums based on any extra options chosen to be included in the insurance. The cost is that the premium becomes more expensive. The benefit is that you are more financially protected in case something bad happens.Analyze deductibles and their effect on policy.A deductible is the amount of money that you must pay before your insurance takes over. Higher deductibles lead to low premiums while low deductibles lead to high premiums.DepreciationDistinguish between straight-line method, declining balance method, sum of the year’s digits method, and MACRS method.Straight line: constant deprecation that are used for assets that have the same benefit over time.decline balance: accelerated deprecation that are used on assets that lose their value quickly.sum of year digit: Simulates higher deprecation early on.MACRS: fixed deprecation percentages that change based on the class of the asset.Determine straight-line depreciation for a year.deprecation=(start value-end value)/(time in years)Determine the depreciation expense on plant assets by the sum of the year’s digits and declining balance.deprecation=(start value-end value)(remaining time/sum of years digits)Determine modified accelerated cost recovery system depreciation.Find the asset's class, choose deprecation method, use deprecation table, calculate deprecation.Use the straight-line depreciation method to find the value of an asset.deprecation=(start value-end value)/(time in years)Subtract the amount deprecated from the initial value of the asset.InventoryDetermine the cost and value of inventory.The value of your inventory is the total value of the individual items in your inventory. There is cost in maintaining your items and the cost of housing space.Determine rate of inventory turnover.A measure of how fast inventory gets sold and resupplied.Determine the value of ending inventory using Average Cost (weighted average), FIFO, and LIFO.Average cost: cost=(total cost of goods)/(total amount of units)FIFO: Find the cost of the oldest inventory for the items sold. Use the costs of recent inventories for remaining items to calculate value of ending inventory.LIFO: Same process for FIFO but switch out new inventory for old inventory and old inventory for new inventory.Ratios and ProportionsDefine the terms ratio and proportion.Ratios and proportions is a measure of how much of a population meets a certain requirement in the population itself. Use ratios to evaluate profitability, efficiency, and leverage.High ratios usually mean good (high efficiency, profitability, etc.), and small ratios usually mean bad (low efficiency, profitability, etc.).Create ratios to express the quantitative relationship between two amounts.a/b=c/d where a and c are related and b and d are related.Use ratios, proportions, and percents to solve problems involving financial calculations.convert percents and decimals into fractions and set up a ratio to solve it. Add a financial context to it.Analyze and explain methods for solving problems involving proportions such as scaling and finding equivalent ratios.Ratios: a/b=c/d plug in ur values and solve for the missing variable.Scaling: multiply by the scaling factor and the unit conversion when needed.