Required: Solution: Exact interest at actual number of days, I, as b. Exact interest at approximate number of days, [., c. Ordinary interest at actual number of days, fo, d, Ordinary interest at approximate number of days, /o, Number of Days ‘Actual | Approximate — Time Time April 11-30 19 19 May 31 30 June 30 | 3 duly 31 30 ‘August 31 30 September 30 30 October 31 30 November 30 30 December 31 30 January 31 30 February 1~19 19 19 TOTAL 314 308 ae dep = Pr (A Time = 50,000 + 0.0275 3+ Je, = P 1,182.88 snow soar7s «2 1,160.27 | 167© ay = Pr (feastzine) =P 50,000 + 0.1275 « 1, = P 1,199.31 a. I= Pr (Aeerenimate Tie =P 50,000 + 0.1275, a Iu, = 1,176.39 Therefore, the exact interest at actual time of 314 days is P 1,182.88 while a approximate time of 308 days is P 1,160.27. Also, the ordinary interest at actual time of 314 days is P 1,199.31 while at approximate time of 308 days is P 1,176.39. Compound interest multiplies the interest rate by the original principal plus the interest that is collected during the time of investment. Hence, compound interest computes interest from the principal and interest previously earned by the principal The compound interest, 1 is the amount paid on the original principal P and on the ‘accumulated past interest, ie. ne 4 1) where Pis the principal, ris the rate of interest, nisthe number of times compounding ‘occurs in a year and t is the length of time in years. r=p([1+2 Interest is compounded either monthly (n = (n= 2), or annually (n = 1), 2), quarterly (n = 4), semi-annually The compound amount, denoted by MY, is the sum of the original principal and the ‘compound interest, .¢. Nominal rate, r =n C4] 168 | Mathematics in the Modern Worldexample 1. Aman made a time deposit of ne milion pesos ina bank whi at 64 seri-tonuolly Sor thecartwo years atul SW compounded cece sheen three year nd Gincompoundamauntattha end eteacage” of each term, Given: P= 1,000,000 7, = 6% =0.06 ; 7) =5%=0.05 ¢, =2yrs;t,=3¥15 my =2 jm, =4 Required: Compound Amount, MV; and MV, 006 = = 0.03 Solution: = = 05 ae = 0.0125 MY, = P+ 0™ = P 1,000,000 (1 + 0.03)* MV, =P 1,125,508.81 MV, = MY,(1 + P 1,125,50881 (1 + 0.0125)" MY, =P 1,306,439.44 after two years is P 1,125,508.81 and three Therefore, the compounded amount years after then the compounded amount will be P 1,306,439, AA, te compounded quarterly will P-9,000 accum ulate to P 12,500 in Example 2. At what ra five years? Given: 9,000 12,500 te Syrs m Required: Nominal rate (r) Solution: netem=504=20 ram cey- 1] -<[ eas] (0.1325 = 13.25% = 134% Therefore tern refore, at 131496 compounded quarterly the amount of ® 9,000 will accumulate 500 in five years | 169 ba —Example 3. How long will it take for P 15,000 to accumulate to P 17,500 at 2x5, compounded monthly? Given: P =P 15,000 Mv = 17,500 = 2% = 2.5% = 0.025 m=12 Required: Time (t) Solution: miogii+) ~ T2log(1+0.002) ¢ =6.429 yrs <6 years and 5 months * Credit Cards and Consumer Loans Accredit card issued by a bank, charges users a financial charge for every transaction made. This fee grows by a compound interest of a bank set interest rate each month. Note ‘that the compound interest rate for the financial charge is not in years but in months, thus ‘the time in the compound interest formula should be in months too. For example, a card issuer requires the credit card holder to pay at least 5% of the outstanding balance each month (with @ minimum of 1,000 or so) Example: Assume a man owe P50,000 on a credit card. The minimum payment is calculated as 5% of his balance: Payment = (minimum amount required)(batance) (0.05)P50,000 But always remember that a credit card charges interest every month, and usually one might spend more with his card after a payment was made. Thus, in many cases, the same minimum applies: a percentage of the tatal loan balance is due. 170 | Mathematics in the Modern World‘Consumer loans are loans obtain to pay for an item that is fairly expensive and not affordable. Similar with instalment loans, itis usually repaid at regular intervals within a period of time, usually paid monthly. The amount to be installed or the periodic payment, I _ Pra+r) att where P is the original price of goods considered as the principal, r is the rate of interest, nis the number of times the goods will be paid in installment basis, ‘A working mom planned to buy an automatic washing machine worth P 35,000 in a home credit appliances store which offers 3% interest and payable in 18 months. How much will be her monthly installment? Example: Given: P= 35,000 r= 3% =0.03 n=18 Required: amount to be installed (1) Solution: Pratr)” arn (# 35.000)0.03(140.03)'" (+003) T= P 2,544.80 ‘Therefore, her monthly instalment fee for the washing machine will be P 2,544.80, Stocks, Bonds and Mutual Funds A stock is a measure of ownership in a company. A stock is sold in portions called shares, each of which represents a fraction of the company. A stock certificate is a piece of paper which represents a fractional ownership share of a company. A shareholder who ‘owns the stock certificate earns proportionately to company’s profit. The owner can even sell shares to the public to raise cash quickly. A stock market is the network of buyers {and sellers of stocks included in a stock exchange and also the stocks which are traded in Private, abort nds at also traded at stock exchange. A bond is 8 financial device through which Tower is duty-bounded to pay the principal and interest on a loan at specific date in the future to the lender or bondholder. A bond is a contract that describes a loan made. onds are considered a relatively safe investment since bonds have assured the investor a ‘interest rate and repayment at a certain date. 171 baA mutual fund is an investment vehicle made up of a pool of funds collected from Many investors for the purpose of investing in securities such as stocks, bonds, money ‘market instruments and similar assets. Mutual funds are operated by money managers, who invest the fund's capital and attempt to produce capital gains and income for the fund's investors. A mutual fund's portfolio is structured and maintained to match the investment objectives stated in its prospectus One of the main advantages of mutual funds is it gives small investors access to professionally managed, diversified portfolios of equities, bonds and other securities Each shareholder, therefore, participates proportionally in the gain or loss of the fund. ‘Mutual funds invest in @ wide amount of securities, and performance is usually tracked as ‘the change in the total market cap of the fund, derived by aggregating performance of the underlying investments. ‘Mutual fund units, or shares, can typically be purchased or redeemed as needed at the fund's current net asset value (NAV) per share. A fund's NAV is derived by dividing the total value of the securities in the portfolio by the total amount of shares outstanding An annuity is a sequence of equal payments made at equal intervals of time. Quarterly stocks dividends, annual premiums on insurance policy, monthly payment of rent are some example of annuities. Payment interval is the time between successive payments of an annuity while the time from the beginning of the 1" payment interval to the end of the last payments called the term of an annuity. The sum of all the payments made in one year is called annual rent. ‘An annuity in which the payments begin and end on fixed dates is called annuity certain. A contingent annuity is one in which the term depends upon some event where occurrence is unfixed. Installment payments form an annuity certain while periodic life insurance premium payments form a contingent annuity since it cease with the death of the insured. {An ordinary annuity certain is one in which the payments are madgatthe end ofthe payment intervals. The amount o inal value, S, ofan ordinary annuity isthe sum of all the secumulated value of the set of payments due at the end of the term, while the present alue of an annuity, A, is the sum ofall the dlscounted value of several payments due 3¢ the beginning of the term. The formulas fr the final value (3) and present vee (A) 2° related by the equations S=AA+D" = A=sAti™ where iis the interest per conversion period and nis the total number of payments 4172 | Mathematis in the Modern WorldThe formula of the amount or final value S of an ordinary annuity of R for n periods is RU +0"= 1 i where R is the periodic payment, is the interest rate per period and nis the number of payments. ‘The formula to find the present value A of an ordinary annuity R for n periods is, Ra- (+i) i where Ris the periodic payment, /is the interest rate per period and n is the number of payments. Formulas for periodic payment R and for the number of payments n are deduced ‘either from the formula of the amount S or the formula of the present value A of an ordinary annuity. Example: A man receives ® 10,000 every year for five years, and invests each payment at 5% interest. Find the present value and the final value of the annuity. R=P 10,000 = 5% = 0.05 5 Required: Present Value (A) Final Value (5) Given’ Solution: RU- G+)" __ P10,000)1~(+0.05)"5 ~ 005, A= P 43,294.77 RA +i"= 1 5 = RK 5 J = 20,000f(1+0.05)5— 1 ~ 005 S = P55,256.31 Therefore, the present value of annuity is ® 43,294.77 while its final value is 955,256.31, | 173Home Ownership A mortgage is a legal agreement that gives 2 conditional right of ieauiee ‘on an asset or property by its owner to a lender as security for 2 loan. The lender's security interest is recorded in the register of title documents to make this agreement Public ‘The mortgage is voided upon full payment of the loan. ‘All legally acquired assets can be ‘mortgaged but the assets most commonly put on mortgage are jand or buildings. Applying for 2 mortgage also means applying for a loan. An inital down payment, also known as mortgage down payment, is a fraction of the total price, and the rest amount, considered as the principal balance would be financed by a bank or any financing agency which has to be paid over a period of time with corresponding interest ‘An amortization is a distribution of payment into installments over a period of time a set by amortization table, An amortization includes a partial repayment of the principal Joan and interest. The periodic payments R for an amortized loan is where Pis the amount of loan or the principal balance, r is the rate of interest in a year, n is the number of periodic payments in a year and tis the period of repayment in years. Ist me Example: A man purchased a house and lot in a subdivision worth ®400,000 payable in 25 years with 12% interest per annum, How much would be his monthly amortization? Given: 400,000 12% Required: monthly amortization (R) Solution: ie R=—__1__ rhe 1-(14 2 a) P00 0082 yn 4212.89 Therefore, the man’s monthly amortization fo his house and lot is P 4,212.89 174 | Mathematics in the Modern World£. Apportionment and Voting, The legal term, apportionment means distribution or allotment in proper shares. It is the division and allocation of something among different people or groups. Moreover, apportionment is the problem of dividing up a fixed number of things among groups oF different sizes. In politics, this takes the form of allocating a limited number of representatives among voters. one of the most precious rights in our democracy is the right to vote. Voting is a {group such as a meeting or an electorate to make a decision or express an method for a ‘campaigns. Democracies elect pinion, usualy following discussions, debates or election holders of high office by voting, « Introduction to Apportionment fairly dividing a fixed number of identical and Apportionment is the process of ber of units each of which is entitled to a certain indivisible objects among a certain num proportion of the total There are several formulas for apportioning, To make these formulas more standard | and the resulting allocation quotas more precise, the standard divisor (SD) and the standard quota (SQ) were defined as follows Formula for Standard Divisor __total population in the group = total number to be apportioned > Formula for Standard Quota population in the group i oe @ ‘SD There are four methods of apportionment: (1) Hamilton; (2) Jefferson; (3 ‘and (4) Adams's method. 3) Webster; + The Hamilton’s Method Itis one of the earliest apportionment methods. Steps: 1. Find SD total population Total number to be apportioned 2. Find SQ population in the group ee ‘SD 175 es3. Round SQ down to the nearest integer {I 4. Apportion additional slots one at atime fractional part of the standard quotas lower quota). to the category with the largest Example: _ The Department of Physical Sciences (OPS) offers tutoring in Math, Statistics, Physics and Chemistry, The number of students who wishes to undergo tutoring in each subject is listed below. If the department can only afford to hire 20 tutors, determine how many tutors should be assigned to each subject. Subject ‘of Students Math 325, Statistics 265, Physics 130 Chemistry B Total 795 Steps. 1. Find SD total population total number to be apportioned sp = 73. 239.75 2. Finds 20 population in the group $0 = ee ohn the'grow, 2 SD [ No. of | subject Quota - = 330 Math a5" | Se ~ | 265 Statstes | 265 | 2° = 6667 : 130 ] Physics iso; | 28 _Phisic BE 3.270 Chemistry | 75 | 2 | Chemistry | 78 | aang = 1.897 Total | 795 | | 176 | Mathematics in the Modern World3, Round SQ. down to the nearest integer (lower quota). No. of Subject — Students | Math 325 Statistics | 265 Physics | 130 Chemistry | 75 Total) 795 | 4, Apportion additional slots one at a time to the category with the largest fractional part of the standard quotas. ‘since the obtained number of tutors was 18, but the actual number of tutors are 20, then there are stil 2 to be apportioned which now will be allotted to that with largest fractional part, thus No. of ] Subject | seudents Quota initial 0 Math 325 a ai7%6 | 8 | 8 265 istics | a= z statistics | 265 | 5 a 6067 | 6 | i? 7 i ae 23270] 3 | 3 Physics 130 3] 3.271 Chemistry} 75 | gang = 1887 |} 2 Total | 795 78 | 20 | Therefore, 8 tutors will be assigned in Math, 7 in Statistics, 3 (9 Physics and 2 in Chemistry. + The Thomas Jefferson Method Jeflerson’s method attempts to do apportionment by using 2 modified divisor wo thats slighty lower than the standard divisor SD to obtain a modified quota Ma that is Slightly higher than the standard quota SQ. 177