# DePaul LSP 120 - Financial Matters (10 pages)

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## Financial Matters

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## Financial Matters

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Pages:
10
School:
DePaul University
Course:
Lsp 120 - Quantitative Reasoning and Technological Literacy I
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LSP 120 Financial Matters Loans When you take out a loan borrow money you agree to repay the loan over a given period and often at a fixed interest rate Many lending institutions also require some form of collateral for example if you take out a car loan the car is the collateral Loans If you borrow X amount of money at Y interest rate to be paid back over Z months how much is the monthly payment Use the Excel function PMT Rate is yearly interest rate divided by 12 Nper is the number of months Pv is the amount borrowed Loans How much interest or finance charges do you end up paying over the life of the loan Take your monthly payment multiply by number of months subtract original loan amount Loans Let s buy a condo or a house Credit Cards A very dangerous form of loan Interest rates finance charges are often very high and are usually not simple interest but some complex algorithm that calculates an average daily balance Even worse most credit cards offer a minimum monthly payment and substantial late fees Credit Cards Best Rule Don t use the credit card unless you can pay it off each month Don t carry too many credit cards Don t use your credit card to get cash Don t make a late payment Pay more than the minimum payment Use a debit card instead Investments If you save money in an account they usually pay you interest based on some interest rate The amount in your account is multiplied by the interest rate and added to your account Investments We have already seen this is exponential growth In banking it is called compounding Recall the basic formula is A r A where A is the current amount and r is the interest rate or growth rate Investments What if we open a savings account and some money each month Set up a spreadsheet Month 1 BegBal Int Addl EndBal 1000 04 12 50 sum Let s now tackle our last set of Activities

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