Financial Maths

1. How will the knowledge of financial
mathematics help manage my wealth?
Shanveer

2. Overarching Inquiry Statement
• Humans use logical mathematical processes to
simplify, quantify and model scenarios in order to
make reasoned financial decisions

3. Curiosities (To be completed by
myself)
• Factual:
When can I retire with enough money?
How much interests do I to pay for my house?
What kind of job offers the most stability?
• Conceptual
• What is the most important financial math formula?
• Is there a way to calculate the best method to finance my
house?
• Debatable
• Can I create a bank to solve world poverty issues? How?

4. Review:
Personalized
Concept Map

7. Profit, revenue and loss
• What is profit?
• What is revenue?
• What is loss

8. What is percentage profit,
revenue and loss
• What is percentage profit?
• What is revenue?
• What is percentage loss?

11. Product Cost
Price
Selling
Price
Profit Percentage
Profit /
Percentage
Mark up
Total
Number
of
Products
to be sold
per
month
(Target)
Total
Earnin
gs
Total
Profit
Cappucino $0.80 $4.00 $3.20 3.20
0.80
x 100 =
400%
400 400 x
$4 =
$1600
400 x
$3.20 =
$1280

12. XXXXXX Overheads Analysis:
Decide on the opening hours of your store:
9am till 5pm
 How many hours are you operating the café? 8hours
 How many employees do you need for your shop? 4 employees
 What positions are you offering? For example: Chef, Waitress, Cleaner, cashier
 How much are you offering to pay them per hour? This will be answered later

13. Opening
Hours
Employee
and job
Rates
per
hour
Wages
per day
Weekend
penalty
rates
Percentage
increase
Total Wage
bill

14. Investigation
into Simple
interest &
Compound
Interest

15. Simple Interest

16. What is simple interest?
• Simple interest is an interest charge that borrowers pay
lenders for a loan. It is calculated using the principal
only.
• Simple interest is calculated by multiplying loan
principal by the interest rate and then by the term of a
loan.
• Simple interest can provide borrowers with a basic idea
of a borrowing cost.
• Auto loans and short-term personal loans are usually
simple interest loans.
• Simple interest involves no calculation of compound
interest.
• A benefit of simple interest over compound interest can
be a lower borrowing cost.

17. Applications

18. Buying a car
• Firstly, I went on Carsales.com.au to search
up a car I wish to purchase. Then, I went on
finder.com.au to look up the interest rates
and considered purchasing the car, taking a
loan over a couple of years.

19. First Goal in life (carsales.com.au)
• Getting a car
Principal (Original Cost) = $83 490
rate = 6.24% (0.0624)
Time = 7 years
• Interest = Principal x rate x time
= $83 490 x 0.0624 x 7
= $36468.432
Total amount payable = $83 490 + $36468.432
= $119958.432
= $119958.43 (to 2 dec pl)
Monthly payment = $119958.43 / 84
= $1428.08 ( to 2 dec pl)

20. Extension:
Depreciation
• The term depreciation refers to an
accounting method used to
allocate the cost of a tangible or
physical asset over its useful life.

21. Depreciation Calculations (Year 10)

22. Calculations
• Fv = Future value (ending after 1 year older)= $82 990
• Pv = Present value (starting at 2020) = $83 490
• rate (r)= ??
• Number of years (n)= 1
• Fv = Pv (1 - r)n
• 82990 = 83 490 (1-r)1
• 82990 = 83490 (1 - r)
• 82990 = 83490 – 83490r
• 82990 – 83490 = - 83490r
• -500 = -83490 r
• r = -500/-83490
• r = 0.0059884
• Percentage = 0.0059884 x100 = 0.59884% (Rate of depreciation)

23. Investment property

24. Second goal – A
house
(realestate.com.au)

25. Purchase a property
• Pay a deposit: 10% of the total price
• Price of the property: $575 000
• Deposit = 0.10 x $575 000= $5750
• How much do I have to borrow? = 575 000 – 5750 = $569 250
• Interest rate = 4.74% or 0.0474 (decimal)

26. Year Simple Interest
1 26982.45
2 53964.9
3 80947.35
4 107929.8
5 134912.25
6 161894.7
1 2 3 4 5 6
26982.45
53964.9
80947.35
107929.8
134912.25
161894.7
0
20000
40000
60000
80000
100000
120000
140000
160000
180000
1 2 3 4 5 6
Interests payable over time
Year Simple Interest
What do you notice about the growth of interests in this graph?
Linear? Patterns? What is the x-axis? What is represented by the y-axis?

27. Third Goal – Being an AFL
Player
As a xxxxxx, I will be investing 10% of my annual pay. This
amount will grow exponentially over 30 years.
The total amount at the end of the period will be…

28. Investing in Superannuation
$-
$10,000.00
$20,000.00
$30,000.00
$40,000.00
$50,000.00
$60,000.00
$70,000.00
0 5 10 15 20 25 30 35
Mikki's Investment over 30 years (Compound Interest)
Year Principal Interest EOY Principal
1 $ 10,200.00 $ 650.76 $ 10,850.76
2 $ 10,850.76 $ 692.28 $ 11,543.04
3 $ 11,543.04 $ 736.45 $ 12,279.48
4 $ 12,279.48 $ 783.43 $ 13,062.92
5 $ 13,062.92 $ 833.41 $ 13,896.33
6 $ 13,896.33 $ 886.59 $ 14,782.92
7 $ 14,782.92 $ 943.15 $ 15,726.07
8 $ 15,726.07 $ 1,003.32 $ 16,729.39
9 $ 16,729.39 $ 1,067.33 $ 17,796.72
10 $ 17,796.72 $ 1,135.43 $ 18,932.15
11 $ 18,932.15 $ 1,207.87 $ 20,140.03
12 $ 20,140.03 $ 1,284.93 $ 21,424.96
13 $ 21,424.96 $ 1,366.91 $ 22,791.87
14 $ 22,791.87 $ 1,454.12 $ 24,245.99
15 $ 24,245.99 $ 1,546.89 $ 25,792.89
16 $ 25,792.89 $ 1,645.59 $ 27,438.47
17 $ 27,438.47 $ 1,750.57 $ 29,189.05
18 $ 29,189.05 $ 1,862.26 $ 31,051.31
19 $ 31,051.31 $ 1,981.07 $ 33,032.38
20 $ 33,032.38 $ 2,107.47 $ 35,139.85
21 $ 35,139.85 $ 2,241.92 $ 37,381.77
22 $ 37,381.77 $ 2,384.96 $ 39,766.73

29. Fourth Goal – Business
(Commercialrealestate.com.au)
• In this project, I am interested to venture into……
• There are 2 categories in businesses, pragmatic
and love.
• I love to sell….
• In the pragmatic view, I would want to sell…..

30. Reducible
interests

31. Reducible interest rate loan
Principal Amount = $5000
Agreed Annual Payment = $1850
Reducible Interest Rate = 12% per annum

33. Full Settlement
• 4th Year Payment = $782 + $93.84 = $875.84

34. Reflection
(Lesh’s
translation
model)