Professional Documents
Culture Documents
Name_____________ Date________
Personal Finance.
Please be aware of the following resources available to you after this course is finished.
Write down these web addresses at home. Post them on your fridge for future
reference!
Additional Financial Tools are available at:
Financial Consumer Agency of Canada.
Website: www.fcac.gc.ca
Canadian Mortgage and Housing Association.
Website: www.cmhc.ca
Tools
Formulas
Compound Interest Formula:
A = P(1 + i)n
FV = Pmt[(1+i)n -1]/i
PV = Pmt[1-(1+i)-n]/i
On our calendar, a leap year occurs when the year is evenly divisible by four,
except when the year value is divisible by 400;
Memory aid: The song lyrics Thirty days hath September; April; June; and
November. All the rest have thirty one. Except for February, which has 28, unless
its a leap year when it has 29.
Memory aid: Knuckles on your fists also provide a way to remember whether or
not a month has 30 days or 31 days. Make two fists and count the knuckle and
troughs between the knuckles. Knuckles have 31 days. Troughs between
knuckles have fewer days. Do not count the space between your fists as a
trough. It memory aid works. Try it!
[2 marks]
Months
[2 marks]
Number of Weeks
2 years
5 years
20 years
30 years
3. Depositing $100 per month means depositing how much in each time period? [2
marks]
Amount ($)
5 years
10 years
20 years
25 year
30 years
4. Earning $40 000 in one year means earning an average of how much in each time
period? [3 marks]
Time
Period
a month
one week
one day
six and a
half
months
three
months
Amount ($)
[3 marks]
c) The year that will you turn age 65 is______. Is it a leap year? How do you
know?
[3 marks]
a) 1000(1.0325)1
=
b) 1000(1.0325)60
=
c) 1000(1.0325)-60
8. a) State the compound interest formula in terms of A, P, i, and n. ______________
b) Rewrite the compound interest formula A=P(1+i)n in terms of FV, PV, i, and n.
[2 marks]
9. True or False? Multiplying a value by one will result in a larger value. Give an
example. [1 mark]
11. True or False? Multiplying any positive value by a number between zero and one
will result in a larger value. [1 mark]
12. True or False? The number 0.804 is greater than the number 0.84. [1 mark]
13. True or False? The number 1 + an increase of 5% is greater than one. [1 mark]
14. True or False? A 5% decrease in value can be found by multiplying the initial value
by 0.95. [1 mark]
15. True or False. A 5% increase in value can be found by multiplying the initial value
by 1.05. [1 mark]
16. True or False. Another way of saying per year is per annum. [1 mark]
17. True or False. Another way of writing per annum is /a. For example, 6%/a. [1
mark]
18. True or False. A series of payments or deposits paid at regular intervals is called an
annuity. [1 mark]
19. True of False. Understanding math improves the likelihood of making good
financial decisions. Justify the statement. [1 mark]
21. True or False. The compound interest formula A=P(1+i)n can also be written as the
future value formula FV = PV(1+i)n. [1 mark]
22. How is an annuity different from a one-time investment? Show the difference
visually using time lines. [2 marks]
23. Show step-by-step how the future value formula, FV = PV(1+i)n, can be rearranged
to give us the present value formula PV = FV(1+i)-n.
[2 marks]
24. How many semi-monthly payments will be made if payments are made for a period
of one year? Explain your reasoning. [1 mark]
26. Solve 8000 = 1.005n. Do not round. Hint: Use log button. [2 marks]
28. Solve 7000 = (1+i)60. Do not round. Show all steps. [2 marks]
. [1 mark]
31. Show the calculations. A person buys a home for $300 000 on June 1st, 2016. The
home value increases 3% each year. What is the value of the home at each of these
times in the future? :
a) June 2017?
b) June 2018?
c) June 2026?
marks]
[3
33. You are buying a $300 000 property and make a down payment of 5% of its value.
[5 marks]
a) Show how to calculate the amount of the down payment.
b) Show how to calculate the amount of money needed for the mortgage.
c) How much equity would you have in the property on the date purchased?
d) Assume the property increase in value by 2.5% yearly, calculate the value of
the property each year for the next 5 years. Use a data table with appropriate column
titles to display the information.
34. Determine the future value of a single investment of $1000 at 4% per year,
compounded annually, for 45 years. [5 marks]
36. Research, gather and interpret information about common real-life annuities such
as RRSPs, RESPs, and RRIFs, describe the key features of an annuity. [6 marks]
Annuity
RRSP
Key Purpose/Features
What does this mean?
How does it work?
RESP
RRIF
Number of payments
Annual interest rate
Present Value
Regular Payment
Future Value
Number of payments per year
Number of compounding intervals per year
<Are payments made at the end or beginning?>
38. Given an ordinary simple annuity with semi-annual deposits of $1000, earning 6%
interest per year compounded semi-annually, over a 20-year term, show which of the
following results in the greatest return by drawing the TVM app data table contents for
each situation and writing a summary conclusion:
Doubling Payment
N=
I%=
PV=
PMT=
2000
FV=
P/Y=
C/Y=
PMT:END
BEGIN
Double payments to
$2000?
Conclusion:
N=
I%=
12
PV=
PMT=
FV=
P/Y=
C/Y=
PMT:END
BEGIN
Doubling the Interest
Rate?
N=
I%=
PV=
PMT=
FV=
P/Y=
4
C/Y=
PMT:END
BEGIN
Doubling the
frequency of the
payments and also
doubling the
compounding
frequency?
N=
I%=
PV=
PMT=
FV=
P/Y=
C/Y=
PMT:END
BEGIN
Doubling the payment
amount and
compounding
frequency to four
times each year?
[20 marks]
[TVM solver/Spreadsheet/Graphing Software - Solve problems using technology that involve the amount, the
present value, and the regular payment of an ordinary simple annuity.]
Task: Show how to calculate the total interest paid over the life of a $10 000 loan with
monthly repayments over 2 years at 8% per year compounded monthly, and compare
the total interest with the original principal of the loan. Does it surprise you how much
interest must be repaid? Of the total amount paid, what amount and percent is principal
and what amount and percent is interest? Draw a stacked bar graph to visually display
these percentages. [10 marks]
(
((
)( )
)
[2 marks]
demonstrate, through investigation using technology (e.g., a TVM Solver), the advantages of
starting deposits earlier when investing in annuities used as long-term savings plans.]
Problem: If you want to have a million dollars at age 65, how much would you have to
contribute monthly into an investment that pays 6% per annum, compounded monthly,
beginning at age 20? At age 35? At age 50? Show your work. Write to explain your
reasoning. [10 marks]
Starting Age 20
Starting Age 35
Starting Age 50
42. [gather and interpret information about mortgages, describe features associated with mortgages (e.g., mortgages are
annuities for which the present value is the amount borrowed to purchase a home; the interest on a mortgage is
compounded semi-annually but often paid monthly), and compare different types of mortgages (e.g., open mortgage,
closed mortgage, variable-rate mortgage)].
Tasks: [5 marks]
a) Explain the difference between an open mortgage and a closed mortgage.
Task: You purchase a condominium with a $25 000 down payment, and you mortgage
the balance at 6.5% per year, compounded semi-annually, over 25 years, payable
monthly. Use an amortization table to compare the interest paid in the first year of the
mortgage with the interest paid in the 25th year. Use a 5-year term. [10 marks]
a)
b)
c)
d)
e)
f)
g)
[10 marks]
Task: Create and print mortgage schedules using the mortgage tools available at
www.fcac.gc.ca , then use these reports to calculate the interest saved on a $100 000
Canadian (compounded semi-annually) mortgage with monthly payments, at 6% per
annum, when it is amortized over 20 years instead of 25 years. Clearly state your
findings for each. Use a 5-year term.
[10 marks]
20 year Amortization
vs.
25 year Amortization
Level 1
(50-59) 5
Level 2
(60-69)
Little
evidence
provided.
Substantial
ly below
standard
expected.
Little, or
incorrect,
mathemati
cal
reasoning
is evident.
Some
evidence
provide, but
lacks detail.
Little or no
written
statements
or
evidence
to support
the
Application of
mathematical reasoning.
(Down payment issues
addressed.)
(Payment schedule
showing monthly principal,
interest, and balance owing
is included).
(Other monthly financial
issues addressed food,
etc.)
Communication:
(Report is clearly written
and effectively
communicated with proper
spelling
, punctuation, and
grammar; Report includes:
Level 3
(70-79)
7
[Meets
Provincial
Standard]
Sufficient
inquiry
evidence
provided.
Level 4
(80 100)
10
Some
mathematical
reasoning is
evident;
Reasoning
may contain
some small
or nonsignificant
errors.
Good
mathematic
al
reasoning
clearly
evident.
Thorough
mathematical
reasoning is evident
and referenced in the
report.
Some written
statements to
support or
evidence to
support the
financial
argument.
Substantial
written
statements
or evidence
to support
the
financial
Thorough written
statements and
evidence clearly
support the financial
argument.
Thoroughly
researched and
documented. Student
clearly understands
the scope of the
assignment.
financial
argument.
argument.