NAME: Charissa Howard
MATH125: Unit 2 Individual Project Answer Form
Number Sense, Estimation, and Financial Computations
ALL questions below regarding CONSUMER CREDIT and SAVING FORRETIREMENT must be answered. Show ALL step-by-step calculations,round all of your final answers correctly, and include the units ofmeasurement. Submit this modified Answer Form in the Unit 2 IPSubmissions area.
CONSUMER CREDIT
For big purchases, many stores offer a deferred billing option (buynow, pay later) that allows shoppers to buy things now withoutpaying the bill at checkout.
Assume you bought new appliances for your newly renovated home.Using the table range values below, choose one total value for theappliances that you have purchased based on the first letter ofyour last name. Denote this by P. It does not necessarily have tobe a whole number.
First letter of your last name Possible range values for P
A–F $4,000–$4,999
G–L $5,000–$5,999
M–R $6,000–$6,999
S–Z $7,000–$7,999
Add your chosen value here:
Total value of the appliances, P $
The store where you bought these appliances offered you a provisionthat if you pay the bill within 3 years, you will not be chargedany interest for your purchases. However, if you are even a daylate in paying the bill, the store will charge you interest for the3 years.
Choose an interest rate between 12% and 16%. Denote this by r, andconvert your answer into decimal form.
Annual interest rate in decimal form, r
Suppose you forget about the bill and pay it 1 day late. How muchinterest do you pay if the store charges you simple interest?Because this is a dollar value, round your answer to the nearestcent. (Assume t = 3 years.)
Interest, I $
Show and explain your work here:
How much is your total bill—the total value of the appliances plusthe interest? Round your answer to the nearest cent.
Total bill (simple interest) $
Show and explain your work here:
How much is your total bill if, instead, the store charges youinterest that is compounded daily? Use 6 digits on yourintermediate calculations, and round your final answer to thenearest cent. (Assume t = 3 years.)
Total bill (compound interest) $
Show and explain your work here:
How much interest do you pay if it is compounded daily? Round youranswer to the nearest cent.
Interest, I $
Show and explain your work here:
Based on the result of your calculations, write a summary about thedifference between simple and compound interest. Explain youranswer.
Do you think a deferred billing option is helpful for shoppers?Explain your answer.
SAVING FOR RETIREMENT
Suppose your goal is to have a lump sum that you can withdraw whenyou retire. To accomplish this, you decided to contribute a portionof your paycheck to an annuity.
Using the AIU Library or the Internet, read about what kind ofexpenses you will be faced with when you retire. Write a briefsummary of your research here:
Based on your research, state the lump sum, in $U.S., that you wantto have when you retire. This is the future value of yourinvestment; denote it by F.
Future value, F $
State the time, in years, that you plan to contribute to yourretirement account. Denote this by t.
Time, t
Based on the first letter of your last name, choose the annualinterest rate for your retirement account from the chart below. Itdoes not necessarily have to be a whole number. Denote this by r,and convert this to its decimal form.
First letter of your last name Possible values for r
A–F 5.00%–6.99%
G–L 7.00%–8.99%
M–R 9.00%–10.99%
S–Z 11.00%–12.99%
Add your chosen value here:
Annual interest rate in decimal form, r
From the table below, choose how many times per year you want tocontribute to your retirement fund. Denote this by n, and this willalso be your compounding period.
Compounding Period n
Yearly 1
Semi-Annually 2
Quarterly 4
Monthly 12
Weekly 52
Add your chosen value here:
Compounding Period, n
Calculate the interest rate per compounding period, which you willdenote by i, by dividing the annual interest rate from #4 by thecompounding period from #5:
i=r/(n )
Round your answer to 6 decimal places.
Interest rate per compounding period, i
Show and explain your work here:
Your contribution per period, which you will denote by C, to thisretirement account is calculated using the following formula:
C=(F*i)/(((1+i)^((n*t))-1) ).
Using the values that you have chosen for F, i, n, and t, calculateyour contribution per period. Use 6 decimal places for yourintermediate calculations, and round your final answer to thenearest cent.
Contribution amount, C $
Show and explain your work here:
Calculate your total contribution to this retirement account, whichyou will denote by TC, by using the formula TC = C x n x t.
Total contribution, TC $
Show and explain your work here:
What can you say about the difference in value between your totalcontribution (TC) and the lump sum (F) that you will receive? Basedon what you have learned in this unit, is there a term that is usedfor this difference?
Show and explain your work here:
Summarize the results of your calculations, and explain why it isimportant to prepare for your retirement.
Show and explain your work here:
