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01:640:106 (6)

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Study Guide

School

Rutgers UniversityDepartment

MathematicsCourse Code

01:640:106Professor

Professor UllmanStudy Guide

FinalThis

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01:640:106

FINAL EXAM

STUDY GUIDE

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Wednesday, September 7, 2016

Mathematics of Money

-Get a calculator that does exponents and logs, that can show a lot of decimal places

-There will be weekly homework (usually due on Thurs by 11 p.m.) (H/W is due when

Sakai says its due)

-Weekly quizzes (usually on Wednesday)

-No late homework is accepted

-Submit homework on Sakai - assignments

-No make-up quizzes or tests (2 midterms and a ﬁnal)

•Why do we take it as given that whenever one person or institution borrows from

another, the lender will demand that the borrower pay interest? Because otherwise the

lender would have no reason to lend. We will assume in this course that all

transactions are business transactions as such, and not, for example, interest free

loans from family members.

•Consequence: If you owe money, then the passage of time in and of itself causes you

to owe even more money. Just because time passes, even if nothing else happens

(even if you don’t borrow any additional money), your level of debt increases.

•Interest is what a borrower pays a lender for the temporary use of the lender’s money

•Principal of a loan is the amount borrowed

•term of a loan is the amount of time for which the loan is made

•Interest rates are expressed in annual terms unless otherwise stated

•Simple interest is if it computed based solely on the principal, no mater how long the

term of the long

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Wednesday, September 7, 2016

•Ex: suppose you rent a $300,000 house. The rent for a full year is $15,000 and the

landlord never raises the rent; the annual amount of rent due remains the same from

one year to the next.

•If you stay for one year, you will “give back” the $300,000 house and pay $15,000 in

rent

•If you stay for 2 years, you will “give back” the $300,000 house and pay $30,000

•If you stay for 10 years you will “give back” the $300,000 house and pay $150,000

•Ex: if you borrow $2,500 for 2 years on 12.3% simple interest, how much interest must

you pay?

•$2,500(0.123)=$307.50 (per year) so $307.50(2)= $615 or $2500(0.123)(2)=$615

•Simple interest formula is I=PRT

•I = Interest in dollars

•P= Principal in dollars

•R=Interest rate, expressed as decimal

•T=term (amount of time) in years

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