Quantitative Reasoning

Part A

1. Watching your Money Grow . Paste your completed table here ( 3 points).
2. Observations and Calculations
   • Based on the completed table, which interest is the most attractive? W hy? ( 2 points)
   • Using the end result at 25 years for 3% as the base , compute the relative change as a percent at 25 years for 5%, 7% and 10%. Express your answers to one decimal place. Show your work . ( 9 points)
   • What do you observe is happening to the relative percent change in the account balances after 25 years as the interest rate changes from 3% to 10 ? ( 4 points)

Part B

1. Comparing Investment Plans

Bernard deposits $1600 i n a savings account that compou n ds interest annually at an APR of 4%. Carla deposits $1400 in a savings account that compound interest daily at an APR of 5%.

• Paste your table here. ( 2 points)
• Who will have the higher accumulated balance after 5 years ? Explain. ( 2 points)
• Who will have the higher accumulated balance after 20 years? Explain. (2 points)
• Discuss how each of the 4 variables [principal (P), the number of years (Y), the number of compounding periods in a year (n) and the interest rate (APR)] can affect the outcome of the investment? (8 points)

1. Comparing Savings Plans

Here are two savings plans : John deposits $40 per month in an account with an APR of 7%, while Lou deposits $150 per quarter in an account with an APR of 7.5%. (Assume that for each plan, the payment and compounding periods are the same.)

• Paste your table Part B, #2 here . ( 2 points)
• Who deposits more money? ( 2 point)
• Who comes out ahead after 10 years? Why? ( 2 points)
• Comment on any lessons learned about savings plans that you find in the se results. ( 4 points)

1. The Impact of Interest on Investment Plans for Planning Ahead

Suppose you want to accumulate $50,000 for your child’s college fund within the next 15 years. Determine your monthly dollar payment, your total dollar payments for 15 years and the interest earned for each of the specified APR’s.

• Paste your table Part B, # 3 here . ( 2 points)
• Discuss the impact of these different interest rates on the overall growth of the investment during the 15-year period. How much of a difference does a single percentage point in the interest rate make? What other factors might you consider in shopping around for the best investment deal? ( 4 points)

1. Choosing an Auto Loan

You need to borrow $10,000 to buy a car . Your bank offers three loan plans : 1) a 3 – year loan at 7% APR, 2) a 4 – loan at 7. 5 % APR and 3) a 5 – year loan at 8% APR.

• Paste your table Part B, # 4 here . ( 4 points)
• For each pla n , b riefly discuss the pros and cons. ( 4 points)
• Explain what plan is most attractive to you . ( 2 points)

1. Loan Consolidation

Suppose that you have the following three loans:

1. $10,000 with an APR of 8% for 15 years
2. $15,000 with an APR of 8.5% for 20 years
3. $12,500 with an APR of 9% for 10years.

• Paste your table Part B, # 5 here. ( 6 points)
• Discuss the pros and cons of accepting this loan consolidation. ( 4 point s )
• What would you personally do and why? ( 2 point)

Part C: Answer the following questions in your own words.

1. What is a mathematical technique a person needs to be able to use to make good decisions about a money management issue? Look at all the exercises you completed for the Financial Management segment of the course and identify one math technique such as making a table to show projected changes that you believe is most useful to a person making a financial decision. State the technique it and explain in at least one paragraph why it is so useful to analyzing a financial situation.

Then, in another paragraph, give an example of how someone would use that technique when facing a financial management issue. Tell what the technique is and how it would apply. (10 points)

2. Mathematical concepts such as relative value are important to understanding the use of mathematics skills. What is the difference between a skill and a concept? Skills are processes you do. Concepts are the ideas used to analyze the situation. For example, knowing how to determine the quantitative effect of a change in interest is a calculation process. Knowing the meaning of correlation between a change in one element of a quantitative situation and another is a concept important to knowing not only which skill to use but also how to interpret the results. What is one concept you understand more clearly because of your work on the Financial Management exercises? (10 points)

3. How has the use of quantitative skills in this chapter influenced your ability to make personal financial decisions? Explain by giving an example of a situation you might face and how you would analyze the situation using techniques developed in this chapter. Explain the reasoning you would use to make a financial decision. You may base your response on an exercise you completed during this module. (10 points)

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Solution: The downloadable solution consists of 11 pages, 1532 words and 4 charts.
Deliverable: Word Document