CHAPTER 18 ITU et} ERS eee Compound interest 1h previous years you have used the compound interest formula in calculations: Aarisnt hee isthe principal for stating moan) ‘rs the interest rate for the period, expressed as a decimal ‘isthe umber of compounding periods ‘Alsthesmountto which Phas grown or rece na amount) “This formula for compound interest may also be written as a recurrence relation, ‘were A, the va ofthe intial amount after time periods and R= 1+ 5th interest rate bing 1% per time pero ior Pe ‘When money invested or borrowed, the compound interes formula is used to calculate what the investment or loan becomes ovr period of tine. payments ate made othe lvestment o loan the final amount changes, either increasing more rapidly in the case ofan investment, or decreasing in the eas of loan, Example 1 ‘Aah deposits $1000 in an investment account thats paying a monthly interest rate of 0.25%, withthe interes ‘compounded monthly, Calculate the value ofthe investment ater 12 months Solution 1000, r=0.25% = 0.0028, n= 12 POL "sa 1000 1.0025" = 103042 ‘Aer 12 months, there is $1030 42 in Ants investment account 480 New Senior Mathematics Advanced for Years 118 12Example 2 Gale kos that he wil nee 10000 fe years met pay fora study tour: He wishes to depot enogh In am investment account 1 achieve thi goal. The account interest wl be ied t 3.6% pe ann compounded ‘monthly How much does he need o depot int the account to achieve this gol? Round your answer tthe net dol Solution Pat.n=5X1 0 months, A= 10000, Use A=PUL+1)" 10000= Px 1.003 10000 Caleb should deposit $8355, Example 3 Maria deposits $100 in an investment account thats paying monty interest ate of 25%, wth he interest ‘compounded monthly. she adds further $100 tothe account atthe art of cach subsequent month. How much ser investment worth tthe end of months? Solution P= 1000, r=0.25% = 0.0028, n= 6,5,4,3,2,1 ‘The fist $1000 is invested for 6 months: A= 1000 1.0025"= 1015.09 "The second $1000 invested for 5 months: A~ 1000 1.0025" 1012.56 “The third $1000 ‘A= 1000 1.0025'= 1010.08 The fourth $1000 is invested for’ months: A = 1000 1.0025 = 1007.52, ‘Te ih $1000 sinvested for2 months: A “he sixth $1000 invested for L month: A “he valu of Mai investment ale 6 month ested for 4 mont 1015 09+ $1012.56 $1010.04 + $1007.52 + $1005.01 +$1002.50 $6050.72 “This could havebeen found using the recurrence elation ina spreadsheet, 1000, r= 0.0025, R= 1.0025, n=6 4 a EE] Tt soma0 2} r= omas | a} on toms | a 2 | orst| 0.00) 07st S| 3 | somsas—iomo.00 01503, 30] + ass, tomoo sas | 5 sass tomo0 esr @) 6 ann am as Later inthis chapter you wil use the sum of geometric series to find the value ofan lavestment ike Maia Chapter 18 Financial mathematics | 481.Future value Example 1, the value of the investment, Future value (FV), could have been found from the Present value (PV), for the same period, would give that fture aloe, I Anh wished to have $1500 afer 6 months at an interest rate of 0.25% per month then this formula wll give the mount tha she ast invest. BV =1500,r=0.0025, = 6, find the PV: PV present vale, The formulas PV 100 Toons ‘Anh would need to make an initial deposit of $1477.70 147770 present value, FV = future value Interest sate per period as a decimal 1s the number of compounding periods Annuities. ‘An annuity ir compound interest investment fom which equal payment ar received on «regular base (at equal periods of time) fora ied period of time “The payment is usually made a the end ofthe time peiod so that no interest i recived until the end ofthe second. time peri, Future value “The future value ofan investment or annuity isthe total value ofthe investment atthe end ofthe term of fnvestment, Including all contributions and interest earned. Present value “The present vale ofan investment or any isthe single sum of money (r rineipal) tha could be initally Jnvested to produce a given fature value ove a given perio of time. ‘The information needed to answer questions about annuities wil be given ina table. The entries inthis table have been calculated using the following formula rian ef 2221] aac where VA\sthe Future Value ofan Annuity PVA isthe Present Value ofan Annuity «asthe contribution per period paid a he end ofthe period +s the interest rate per compounding period asa decimal ‘nis the number of periods TR) ser seirtatemtcsnnanst netiYou can set upa spreadsheet sing these formulae to sei your own aleslatons are with the allowing for. ‘This table gives the Fture value ofan annuity of $1 atthe given interest rat for the given period. ‘Pature vale interest factors (FVA) SL Interest rate per peviod N 1% 2% % a * 1 | 10000 | 1.0000 | 1.0000 | 1.0000 | 1.0000 2 | 20100 | 20200 | 20300 | 2010 | 2.0500 3 | aos | soo | 000 | sane | sass 4 | 4060s | az | ans | a2ses | 4101 s | soir | s2o0 | 5300 | sates | 55256 6 | 61s | «30s | satssa | 60390 | sa0i9 “This table gives the present value ofan annuity of 1a the given interes ate forthe given period resent value interest factors (PVA) 3. Interest rate per period N 1% 2% 3% % 5% 1 [ess [oso | ase | oasis | 09524 2 | 197 | isis | isiss | tes | 18594 3 | asso | amy | anes [avn | ares 4 | e020 | sar | ann | se | 35100 5 | ssa | aris | aso | caste | «3205 6 | sz | sonra | saire | som | sors ‘Te following examples show how tous these tables Example 4 ‘Use the table of fture value intrest factors to ind (@)theforure value of an annuity of 1000 per yea fo 4 yeas a 3% pe anna (0) theatre value ofan annity of 1500 pe yea fo 6 ear 4% pe am Solution (@) 4 years 3% gives a multiplication factor of 41836 fom the table PVA (6) 6 years. 48 gves.a multiplication factor of 66330 from the table FVA= $1000 6.6330 = $6633.00 comers ronan (I)Example 5 ‘Use the table of present value interes factor for an annuity of 1 per period. (@)Jake plans to invest $5000 per year fr 6 years in an annuity. His investment will earn interes a the ‘te of 4% per annum, Calculate the present vale of this annuity (b) Ari takes out personal loan of $9000 tobe repaid over 4 years at an interest rate of 59% per yar: Use the PVA tablet find his yearly repayments Solution (a) 6 years a 4% gives multiplication factor of 52421, PVA =$500035.2421 = $2620.50 (©) Let Abe the yearly repayments Using the PVA table with r= 59% andthe period 4 years, the present valu of “The formula use to create the table wis PVA = aval in table, where a= 1. inthis application, PVA = valu of the loan and a = M the repayments Hence 35460 = 9000, 5000, 3.5460 =9953807 ‘Art willhave to repay $2538.05 every year for 4 years. 3.560. ‘Summary of present and future value interest factors 1 The table of Future value interest factors ie used to find the future vale ofan annuity fora given intrest rate and «cet time period The tbl gives the fate valu of exch dllr ofthe annuity. Multiply this value by the vale of| the sri, 2 The table of present value interes factor is wed to find the present (or current) value ofan annuity for a giver {interest rate ana set time period. The tbl gives the present value ofeach dollar ofthe annuity. Multphy this value by the value ofthe annuity to obtain its present value. {5 “The tale of presen value interes factors canbe used to find the repayments required to payoff aloan ofa given mount at set ate of compound interest over a fined time period. The repayments ae obtained by dividing the ‘ale of the loan by the vale ofthe celin the table corexponding othe interest ate and time period, Present value and future value interest factors Use spreaceat sofware ocroat ates of fron! vali and ux valve interest ace BED) sew serie atiematcs Advanced or Years 11812Example 6 “The table glves the presen value intrest factors fr an annuity of $1 for various interest rates, 1, and number of periods, resent value interes factors decimal) (7) | e002 | 0005 | 00075 | 0.008 | 0.00 71_| stpsiao | spain | sis029s | s4o07s4 | 5.29057 72_| esaises | oases | ss.47ees | 5457097 | s2azii8 73 | 66.6023 | 61.0343 | 5605643 | 55.2995 | 5334111 74 | 6748153 | 6172571 | S663169 | 5.68846 | 5.85641 75_| 6831075 | «2136s | 5720267 | s6asuse | 5436710 76 | 69:13791 | «3.00815 | 5776040 | S67=034 | 5487324 st Interest rate per perio ( (@)Kumba plans to inves $300 each month for 76 months. Her investment wil ean interest a arate of 10,0025 (ss decimal) per month. Use the information in the table to caleulte the present value of thisannuiy () Zephan uses the same able to calculate the loan repayments for his ar loan, His loan is or $22000 nd willbe repaid in equal monthly repayments over 6 years The interest rate on his oan Is 9.6% per annum. Calculate the amount of each monthly repayment, rounded to the nex dalla. Solution (a). 76 months at 0.0025 gives a multiplication factor of 69.1379 from the table. resent value ofthe atnuity = $300 x 69.13791 $2074.37 (b) 6 years 6% 12=72 months, N=72 9.6% pa.= 0.8% per month so r= 0.008 asa decimal rom the abe the vale tobe used is 5457097. Hence 2000 = Mx 5457097 22000 ‘157097 103.14 "The repayments would be $404 per month, rounded to the nex dll M Effective annual rate of interest “Theeffective annual rate of interests away of compatng intrest rates ona common basis even when they are _quoted as per annum, per quate, per month, pr day etc. Without a common bass tis very hard to compare the | ‘vert of diferent interest ates that are applied a diferent time periods By converting each interest att is effective annual rte you can compare the eoss of loans or the returns on investments so asto decide which one ie best for yo. Bfetve annual interest rate =(1+ 2 chapter 18 Fanci athens eyExample 7 ‘What isthe effective annual interest rate fr loan advertised as (@) 6% pa. compounded monthly (©) 6% pa compounded quarterly (€) 686 pa. compounded dally (use 345 days ina yea) Pc maine a= 285) 0) r=B0s n= ‘Bective annval interest ate=( (© rats nabs ci nl ine t= (+ 96) 126% = 6.183% Example 8 ‘Avhome loan from Bank Bis advertised with an interest rate of 5% pa. compounded monthly. Credit Union ‘Cadvertss their home loan with an interstate of 49% pa compounded dally. there are no atherfes involved, which financial nsitaton offer the beter deal? Solution Bank: r=00,=12 recive annul iterate = (149 ss)? Credit Union C:r= 0.049 Fee Credit Union C offers the better desl, 1 (@) Julian deposits $1000 in an investment account that paying a monthly interest rte of 039% with the Interest compounded monthly. Caleulte the value ofthe investment ater 12 months. (©) Minh deposits $2000 in an investment account that spaying a monthly interes eate of05%, with the Interest compounded monty. Calculate the value ofthe investment ae 10 months. (6) Ben deposits $3400 in an investment account that spaying a monthly interest rate of 0.35%, with the interes compounded monthly. Calculate the value of the investment aftr 20 months | 486 New Senior Mathematics Advanced for Years 11 & 122 “The table shows the future value ofan investment of $1000, compounding yesh t varying interest ates for Aiferent periods of time Puture values ofan investment of $1000 ‘Number Interest ate per annum oO iy 2% a | aw x 1 | 1010.00 | 1020.00 | 103000 | 10000 | 1050.00 2 | 1m2010 | 104040 | 106090 | rosi.60 | 1102.50 3 | ans0.30 | ro6i21 | 109273 | 11246 | 1157.63 4 | soso | tomz4s | 112551 | 116986 | 121551 5 | 1osi01 | ni0%0s | 115927 | t2i66s | 127628, 6 | w61s2 | 11266 | 119405 | 126532 | 134009 (a) Based onthe information provided, what theFature vale ofan investment of $3000 over years at 3% pa? A $3374.58 B 3337653 © $327819 D sas02.08 {) Based on the information provided, whats the fture value of an investment of $4500 over 6 years at 5% pa? A $5053.28 B $5684.94 © $5360.35 $6030.41 {) ase onthe information provided, whats the fture value ofan investment of $500 over years at 4% pa? A 360833 $607.75 © s2as1.02 D $243330 {Based onthe information provided, whats the future value ofan investment of $700 over 3 years at 2% pa? A 8722630 B sr87 © sss D sm ‘9 Brian and Faye plan to have $25000 in an investment account in L0 yeas time to pay for a cruise The interest rate forthe account wil be fixed at 42% pe annum, compounded monthly. How much do they need to ‘posit into the account to achive this goal? Round your anewer to dhe next dalla 4 What amount mst be invested now at 6% per annum, compounded monthly so that in 4 years it wl ave row to 800007 {5 The table shows the compounded value of $1 ‘ature vals ofthe compounded values of $1 ai Interest rate per period m [am | an | a | se | ow 1 | 1010 | 1020 | 1030 | 1040 | 1.050 2 | 10 | 1010 | sost | 1082 | 1.103 3 | 1030 | tor | 109s | tas | tse 4 | ton | om [6 | sao | 126 | 5 | 10st | sto | tise | rai | 176 | 138 6 | 1002 | ize | iis | 1265 | 30 | 119 7 | 197 | 119 | 1230 | 1316 | 1407 | 1504 8 | 10m | tam | t267 | 120 | rare [ise Use this table to caeutate the value ofthe flowing investments. {a Stuart invests $2500 for 4 years at an interest rat of 3% per half year compound half early. {() Kina invests $5600 for 2 years at an interest rate of 1% per quarter, compounded quarterly. {e) Aaliyah invests $2000 fr 5 years at an interest rat of 58% per annum compounded yea Chapter 18 Fancal mathematics om(@) Achim makes two investments of $4000 each. His istinvestment i for 3 years a an intrest rte of {6%per annum compounded yearly His second investment is for 3 yes ata inetest rte of 3% pr half ear compounded half yearly. Which investment ens the most interest and by how much? 6 Following sa table of future valu interest factors for $1 contribution to an anit. Future valu interest factors an Interest rate per period 1% 2% 3% “8 5 1 | 1.0000 |” 1.0000 | 1.0000 | 1.0000 | 1.0000 2 | 20100 | 20200 | 20300 | 20100 | 2.0500 3 | soso | soso | 3009 | size | sass | soso | aiais | iss | 42465 | aio 5 | soo | s2o0 | som | sai | 55256 6 | 6120 | «aos | oases | 66330 | sao Answer the fllowing questions using this table (@)_ certain annulty involves making equal contributions of $1000 into an account every 4 months for 2yearst an intrest rate of 6% pee annum. The fate vale of this anny is ‘A. $6308.10 B s6t6s.40 © $0583.00 D §4121.60 {) certain annuity involves making equal contribution of $500 into an account evry 6 months for 2 years at an intrest vate of 4% per annum. The fate vale ofthis anny is AS10100. ——-B $1020000—C$2125250—D_—$20608.00 (0) Acerain annuity involves making equal cntebution of $00 nto an account every yea for 6 yeas at ‘ante rate ul 5 per anmur, The fare vale ofthis analy A $531650 B. $0533.00 © $3400.95 D $6601.90 7 Following stable of future value interest factors for a $1 contibation to an anny Future value interest factors Interest rate per period Petiod oss | im | ae | ay | am | sw 6 | sors] e1s20| ss0s1| 64st) 6.6330| 6.8019 2 | 123356 | 126825) satzi| 14is0| 150258] 159171 1s | tress | woeia7| atat23| 23ania| 250454] 25.1304 24 | 25.4820| 269735 | soaai9| 344265) so.on26| 445020 36 | 393361 | as0769| sisse| aaa7se| 7.5983) 95.4363 42 | 4s.o6s | 518700] eise22 | s20232| 1048196 | 1352918 48 | 4097s] 61.2226] 79.535 | vo1aow | 199.2692 | 198.0254 Use the tale of future value lterest factors to in (@) the fture value ofan annuity of $1000 per yea for 6 years at 3% per annum (©) the faut value ofan annuity of $1500 per yea for 18 years at 4% per annum (6) the fru value of an annuity of $200 per month for 48 months at 6% per annum (@) the fate valu of an annuity of $L00 per quarter for 9 years at 8% per annum (@) the future value ofan annuity of $40 per hal year for 21 years at 6% per annum, ae New Senior Maes ance for Years 1 812{8 the table gives the present vale interest fictors for an annuity of per period, for various interest rates rand number af periods N. Present valu interest factors N Interest rate per period (a5 a decimal) (F) .0025 | 0.005 | 0.0075 | 0.008 | 0.009 ni | cages | s9.ot12 | saan | sua0rs | 52.2966 | oss169 | 60.3395 | s547e9 | sasrio | sa.sziz 73 | esosor | o10ms | soso | ss29 | saa4i 74 | erasis | 61.7257 | soon17 | ss.c845 | sa.8s64 75 | ession | e237 | s7.am7 | s62346 | 54671 76 | 69.1379 | son | 57.7601 | sa7a0s | sus732 Use the tablet answer the following questions (@) What isthe present value of n annuity of $200 per month fr 71 months ifthe intrest rate is 0.75% per month? A $1095.38 (b) What isthe present vale ofan annuity of $150 per month for 74 months ithe interest rate is 0.8% per ‘month? A $8078.46 A $379 (@) A toan of $5000 tnnur, What ae the monthly repayments, rounded to the next dollar? ASUS B si0s7858 B sans B $367 to be repld in squal monthly instalments ove 6 years Te interes 9% por B sits 8.49 © sinsaaa4 © $8352.68 (0) A loan of $20000 isto be repaid in equal monthly instalments over 6 year. The interest ate Is 108% per ‘annum, What ae the monthly repayments, rounded to the next dllar® © $361 c suo D siost 01.50 D $8135.19 D $75 D suis 9 “the table gives the contribution per peti for annuity with future vale of 1 at diferent interest ites and different periods of time. ‘Contributions per period for an annuity with a fture value ofS Namber Interest rate (1% per period) otperio’s osm [ose | o7sm [1% | 125% | 15% 1 | 10000 | 1.0000 | 1.0000 | 1.0000 | 1.0000 | 1.0000 3 | ass | 0317 | 3308 | o3so0 | 0392 | os2e 6 | a6s6 | oxsis | 01636 | ors | ores | 0.1605 39 | a1 | oss | 01078 | 01067 | 01057 | a.104s 12 | 002 | oos11 | aos | oozes | o077e | oorer 15 | 00655 | ons | o0s32 | aoszr | oosio | 0.0599 1a | 00544 | o0s32 | aoszr | aosi0 | ooiss | o.osss 21 | aos | 00453 | oom | aoao | ons | oos0s 24 | oo10s | 0.0383 | 00382 | aos | onssa | oosds Chapter 8. ancl mathematics oeUse the tale to answer the allowing questions (a) Barbie and Ken need to save $100000 over 3 years for a deposit ona new house. They make regular «quarter contribution into an investment account which pays interes at 4% pa. How mach do they ‘eed to contlbute each quarter to reach this savings goal? () Beatrice is saving fra deposit to buy a cat. She nceds to save $3000 in a yea. How much must she pay into an investment account each mont if the interest is 3% pa, calculated monthly, to reach this goal? (6) Danh isstarting a superannuation fund He wishes to have $1 000000 in the account afer 12 years. Interests 39 pa fhe makes 2 deposit to this account every six months, how much should he deposit, rounded to the nex dlls, to be sre that he reaches his goal? ‘Use the table ofvalues given in question 5 to answer question 10 410 Fabio makes a one-off deposit of $3000 into an investment account that pays interest atthe rate of 3% pay ‘compounded yearly. {) How much money inthe account after 3 years? (©) Asan incentive, the bank sid that they would double the interest ate after 3 years. IF Fabio leaves the ‘money inthis aecount fr another 3 yeas, what isthe value ofthe investment a the end of this tie? {6 Another bank offered Fabio an interes rat of 1% pa. compounded six monthly forthe fst 3 years and then an interest at of 5% pa. compounded yearly for the next 3 year, What isthe value ofthe investment atthe end of 6 years with this bank? {€) Which investment strategy gives the best rel? 111 Whatis the efectve annual interest rat fo oan advertised as: {@) 4% pa, compounded quarterly (6) 4% pa. compounded monthly {€) 4% pa, compounded daily (use 365 days ina yea)? 42 A special investment account from Bank Bs advertised with an interes rate of 5.196 compounded monthly ‘Credit Union C advertises thelr invesement account with an interest rate of 5% compounded daly. Which financial insittion offers the beter return? 419. Whatietheefactve annual interest rt foreach term deposit at {@) 26% pa. compounded quarterty (©) 25% pa. compounded monthly (6) 2486 pa. compounded daly (use 365 days ina year)? 414 The home loan from Building Society N is advertised with an interest at of 5.4% compounded monthly. Credit Union T advertises their ome losn with an interest rte of 5.35% compounded daily. If there are na ‘other fees involved, hich finan instittion fers the better deal? Baie anes Sequences “The word sequence i often used in everyday language. You sy" sequence of evens: you complete tasks in a certain sequence; the order of chapters inthis book is the sequence in which the Mathematics syllabus is treated ‘Whenever the word sequence’ is used, you are considering set of objects, ideas, steps or event in some definite onder. This order canbe associated with the et of postive integers (1, 2,3, ],as is indicated when you us the terms fs, second, third etc to describe a postion inthe sequence of evens An arithmetic eequence is sequence of terms in which each term ater the fist term is formed by adding a constant number, called the common diference, to the preceding term. For arithmetic sequences ais the fist term, isthe common dflerence and nis the number of terms “The sequence a,a+ d, a+ 2d. (n~ 1) san arithmetic sequence with terms, where a and dae real ‘numbers and ia postive integer. The value ofeach term canbe labelled as 7, and defined as follows Tat std 490 New Senior Mathematics Advanced for Yeas 11 & 12,“This definition i called a reeusive definition because it defines each erm ofthe sequence a Function f the preceding term. Rewriting this definition gives d= 7, ~,_, and this rest ca be used to identify whether a sequence faithmetie. there isa constant cifrence between al successive terms then the sequence is arithmetic. ‘An arithmetic sequence may be defined by its mth term given by Taa+(n—Dd Graphically 7, asa fancton fs linear, consisting ofa series of points for integer values of 030, which follow the stright line given by 7,= a ~ d+ nd The {Independent varlable sand the dependent vavable is 7, Some examples of arithmetic sequences are 2.5.81, andes 12,5,-2,-9, 21nd. A124 3047.44 10, aah ld 43 2+95,2+295,243V5,244V5,... a=24V5,d= V5 Example 9 By finding the dferencebetweensucesive terms identify the sequences that are arithmetic in the allowing: (9) 1,15,19,25.27... (0) 10,12,15,19,28.4 (6) 22,16 10,4,-2 are eyse 56868, @ alss3at Solution @ 5-11 constant. The sequence isarthmetc ® 2-10 19 5, The diference between successive terms is not constant. The sequence i not arithmetic, ven though follows pattern. (0) 16~22=10- 16=4— 10=-2—4=-6,a constant. The sequence is rithmeti. () 6 -8=-2,8-6=2.Thedfference between successive terms i not constant. The sequence isnot arithmetic, ven though it follows a pattern, 3 acon Te see ait You can ure a spreadsheet to check for an arithmetic sequence, First enter the terms into a cola In the next column, starting next to the second term, enter a formula to represent T,~ ,_, eg. '=A2-AI: Fill downto copy thie formula down the column, to the end of the lit of terme. As this formuli finds the diference between each pair of terms, it should be obvious whether or not theres « common iference Generating an arithmetic sequence Use sreacohect oftware to generate conescuve emo an arthmeto secuence. Example 10 For the arithmete sequence 4 9,14 19, ind (@) the valueora (©) thevalue of (@) theexpresion for 7, (8) the 13th term (0) thevalue oft 7, = 99 Chapter 18. Financial mathematics onSolution @ @ (@ T-ate-d TF, 500-1) =5n-1 Sn 1 ke20 Example 11 FT, =7 and 7, = ~5 are two terms ofan arithmetic sequene, ind the values of wand dan use them to write the first three terms ofthe sequence, Solution a a t= Substitute int (1) “The sequence begins 19, 16,13. Ez Miniocee ees a 1 Which ofthe following are slthmetc sequences? ee ee ee @ bah (6 Sttgtp (o) V-1, J+ 1,12 +3,.V945, © nese enter, 2 Forte arthmetie sequence 5,8, 1, 4, in {@) thevalueafa ——@) thevalveofd (0) theexpresion fr T, {@) thetsthtern ——(@) thevalueof 7,98, 8 Forthearithmetc sequence 7,3,~I-8 fin (@) thevalueofa——() thevalueofd (©) heeagresion or, (@ thetsibtem ——(@) thevalueof fT, =-10 4 od the eighth and foutcnth terms ofthe arithmetic sequence 84,20, 26 5 For the artnet sequence 17.2, 166, 16,154. fndT, and 6 theft and second terms ofan arthmet sequence are p and respectively, Wrteanexpresion forthe tenhtrm 7 Find Ty forthe sequence 41,85 Find the arithmetic sequence in which T,= 17 and 7, =52, © Find, ofthe arthmetie sequence in which 7, =54 and 7, 40 Write an expression forthe seventh term ofan arithmetic sequence in which he filter sm and the eleventh i. 11 Find the value of p so that p+5,4p+3, 8p ~ 2 form the fist thre terms ofan arithmetic sequence, 412. How many terms are there inthe arithmetic sequence 9,12, 18,18, (6p + 15)? [ea New Serio Mathematics Advanced for Yeas 11812419 The ist texm ofan arithmetic sequence is and the seventh tem 1s 2. Find the missing five terms ofthe sequence 14 Iman arithmetic sequence theirs term 6 andthe fifth term istwie the fourth term, Find the common dliference 418 Given 36,31, 26 ae the fist thee terms of an arithmetic sequence find the value of mf the mth term is ~4 16 Cans ofjuice ina supermarket display ate tacked so that there are 3 cans inthe top row, in the next ro inthe next and soon. I there ae 1 rows in the display, how many cans of juice ate in the bottom row of the display? 117 Thelengths ofthe sides of right-anged triangle form the terms of an arlthmetic sequence Ifthe hypotenuse 1425 em long, find the lengths ofthe othe two sides. 18. What the sch term ofthe arithmetic sequence 5/2 ~ J3, 343, V5 + J2? Awi-wi BNI-WE OC AS-SNE SVS 419. Alexandra stats anew jb with an iil salary of 828000 per annum. She is promised an increase of ‘00 per quarter forthe fist 4 yeas of her employment. (a) What wll her salary bein 3 months time? (b) Wate an expression fr er slay, n dollars afer» quarters {6} Whats the domain ofthe function Sin? (@) What isthe maximum salary that she can expect to receive? £20 $1000ishortowed fortwo years ata simple interest rate of 0.5% per month, with the interest added monthly (@) How much interests added each month?) How much sowed ater | month? (@) How much sowed ater one year? {@) Hove muichis tobe paid back atthe end of two years? 18.3 SERIES AND SIGMA NOTATION Series ‘When you write set of numbers in order according to some rule, the addition ofall numbers scaled a series and each tmiber inthe sts alle term ofthe series. In other words series ste sum of the terms of is ‘corresponding sequence For example, 144-494 16+... + isa series in which the rst term i 1, the second term is the third term 4s 9 and the mth term is “The sya, o ae commonly used to represent the nth term ofa series. Thus inthe series 1 +4494 16+... T= 1, 1,=4,T,=9and T, = 1.7, isalso called the general term ofthe eres, because i allows you to find any other tern ofthe series according to its rule Spo TT, Ty+ oo Tithe sum ofthe sees, Avsefol rsultisthat, )=7, 41,4 T+ tT, sothat,=S, +7, and hence T,= 5, Example 12 ‘What are the frat thnee terme ofthe series whore general term i given by T,= 1 +2? Solution T=P42-3 hat4206 T=3'+2=01 “his series can be writen a 5,=3+ 6411-4. 0742) Chapter 18 Financial mathematics 493Example 13, Pind the nth erm ofthe sees 447-410-413 + Solution Because the terms increase by 3 each time, you can rewrite each term asa number plas an increasing oli of 3: red n=? =143, Sigma notation (2) ‘The symbol (the Greek capital eter sigma) i used in mathematies to mean ‘the sum of When you sum the erm ‘ofa sequence you have aserles, so sigma notation provide a shorter way to wit the series, ‘You can ewrlte the series discussed above using sigma notation Le ra)-svorus..n6e42) Low "ach sigma means ‘the sum ofthese terms, starting with the value underneath the and continuing to the value above the: For example: 47410440041) + S¥ denote the um ofterms ofthe form where mas the vbes 1,2 34.5 tus 3 ities + Sb+1 dene the sumo tems ofthe form 2+ 1 whee k= 01,23. (coisa integer fomOtomincasve: SY(2k4 = 143#54.-# nD) “he igh-hand sd sth expansion of theses defined by (2k, His als useful to use sigma notation o obtain a shorter expression forthe sum of a numberof terms. s2ee3e 410 2 ata De ‘hele hand expression has erm, Sint) The ectandepeson as 10 ems + aeaeeaes..o2te ae The ee 2 D243 SA HET and expression has 9 terms.Example 14 pass 3) © Yorn Solution Ys ete nfl hen a ter, fe) Swraree eres? ©) Se 143454749 “1 Wit expansions ofthe series defined by the following ese 3 face @ Seen ote oS oka —— w So 2) 2 Indicate whether each statement below ia corrector an incorect expression for I+x4<2 +t. @ Se & de © ye @ Se {8 scsgma notation represent ach ofthe following pee serene maar nmnnrewyieernmmmtnr am tere Femet ar) (a glgtstatatetetglan 2242 64h oa) asarbal sata 4 tahoe (a) Yet eo Senn @ Yorn @ Sy OS® @ Yen @ Loren) @ Yam o Le Ree eer -Anarithmetc eres the sum ofthe ems in an arithmetic equence.Te series rts wih the fist term, which isusualy denoted bya andisthe fst erm ofthe sequence. Te constant smount added cach imeto the term is called the common diference ands usualy dented by “hae S,=a + (ad) (e424) + + (a+ (Ded isa series witha fist term a and a common diferenced The mh term is T= 4+ (0— Ne «The common diffrence given by d=, + Abinote that =, 41,4 1,4... T, ‘ical, test to ter ofthe series This is ite seres, Usingsigma notion: 5, = Y(a+(k—1M) Chapter 18 Financial mathematics 495ess] ‘Sum of an arithmetic sequence ‘You can obtain a formula for S 0 that you dont always have toad the tems to find the sun, ist, note tha the nh erm of esis sometines clled the as term and denoted by 80, =aand T, ==. (0 Id Wate: Sarat d+ (a4 2d)+ (as (n~ 3d) + (a (4-2) (0+ OF— 1) I] Letl=at(n-Iisso: S=ar (ard) +(ar2d) +. (2d) +(l—d)4t Witethiseresineeene: S.=i+(I=a ¥(l-20)4.. 610420 +(a-rd)+a ta Adah oo express] + (2: 2, (0+) (ar ela Den 4+ D-rlot (04D) ‘There are nics ole 25,=n+ s=Meel) Batleasin- Dds S=Metar(r—na) Iisalso important to reais that 5, ‘Summary of formulae + at (ata) + (at 2d) +... (a+ (= 1d) isan arithmetic series + d_ isthecommon diference a, + Tease +SaM2errnd) + 5,=Mesl) wher/=a+(n= id oTeSoScpne Example 15 Find the smn ofthe rt twenty tes ofthe series 3-45-47 + Solution $-3=7~522 sotheseresisaihmetcwih o=3,d=2 nam S=%(204(0-1h) x 20(6s19%2) =H0 Example 16 How many terms ofthe series 4+7-+ 10+... mustbe taken to gives sum of 5312 so the sere arithmetic with S.= (208 1d) ssi=t(o+00-1) 1062= n(an+5) Sn + 5n— 1062 G+ 59)(0— 18) =0 na-193, 18 5 1 must be a postive integer, so n= 18 and 18 terms must be taken. 8 New Saar Mathematics Advanced or Years 118 12Example 17 Find the um ofthe ft went terns oan altel sevs, ven thatthe tenth tem 39 andthe sum of the fest ten ems Solution Ten3® at9d=39 HN) 165: Y(2a+9d)=165 Se ry ai-1 Substsate nt [1 5,=4(aat(n—¥) Example 18 Find the first thes terms othe avithmetc series defined by. Solution 5,-8.4 Seth +n and 5,,=2(n—1) 460-1) S22 3041 7,=tn' en Qr—3n1) saa Ty=8,-§=21-10=11 Hence the seies 8347-411. L the sum ofthe first 16 terms of the arithmetic series 34414524, Find the sum ofthe frst 16 terms ofthe arithmetic series 3442 +5 1 12 Find the sum ofthe frst 12 terms ofthe arithmetic serlesin which the frst teem s 8 and the twelfth term is {3 Find the sum ofall integers between 20 and 50 that ae vse by 3. 4, The ist three terms ofan arithmetic series are-2-+3 48-4 (a) Find the 6oth term, Hence, or otherwise, find the sum of theirs 60 terms of the sve |S The sum ofthe frst 40 terms ofthe arithmetic series 40+ 36-+ 32+. A 3m BIG 2300 {6 An objec fling rel from a height travels 4.9 mettes in the first second, 14.7 metres in the second second and 245 mettes inthe third second, How far hast fallen: (@) aftersix seconds {) between the ih andthe sixth second? 1. nd the sum ofthe frst 50 terms ofan arithmetic svies, yen thatthe fieenth term is 34 and the sum ofthe first eight terms 20, {8 Find the sum ofthe fist 20 terms ofan arithmetic series whose cighth term is Gand whose twelfth erm is, 9 Show that the sum ofthe fist odd postive integersis a perfect square Chapter 18. Fnancial mathematics10 1" 2 18 4 16 ” 18 19 a BR Praha: @ Sok?) @ Yue — @) Lak-n Yor —@ Yer) — o Yorn “The ist erm ofan arithmetic series is 7, the common diference is 2 an the sur of the st terms is 247. Find the vale of Inanarithmete series, ,=Zand 7, =28 How many terms ofthis series are required to give sum of 10922 “The sum ofthe ist thre terms ofthe aithmeti series a+ (a+ d+ (a+ 24+ is 15 and the product ofthe thee termsis 105, Indicate whether each statement below isa correct or incorect sep in ningthe terms of theseries (@) atd=5 Wb) oS+d)=21 (@) a! 100421 Find the sum ofthe integers etween Oand 101 tha are: (@) divisibleby2(O) divisibleby5—(€) divisbleby 2and5 (divisible by 2or but not both. "The sum ofthe frst six tem of an arithmetic series is~12 and the sum ofthe fst fourteen terms 196 Find (@) thesumofnterms —_() thesmallest alu of mfr the sun ofthe series to exceed 250, (8) Theseriesig3 +5474 “The sum ofthe magnitudes of the angles ofan irregular pentagon (ive-slded polygon) 540", The magntides ofthe angles form the terms of anaithmetc series I the largest angle has a magaitudeof 136% find the magnitude ofeach of the ther four anges ‘The sum ofthe first four terms ofan arthmeti series i 34 and the sum ofthe next four terms i¢ 146 ind the sum of the ninth and tenth terms The rungs of adder decreas in length uniformly fom 40cm atthe bottom eung to 30, which low th exponent fanction given by 7," where the independent variables andthe dependent variable sy Some examples of geometric sequences te 2.61854... @=2r=3 SI, 75,-375s ou 23,15 1 18.9,44,24, 3,3V2, 6.642, ate Generating a geometric sequence Use speadhoal ata o generate consethetans fa geomet seaenee. Example 19 By finding the ratio between suecesive terms, identify the sequences that are geometric 24.8,16, (0) 3.6.26.192 (©) 48,24,126, Peat (6) 323,74: akan erated. (Qo s42V8,7+5V% 17+ NE Solution 4 ‘ f@ te w$ +2, constant ati. The sequence is “The ratio snot constant so the sequence geometric. {snot geometric 6 Pete oo 4 fees r=E,a constant ratio. The sequence is “The ratio Is not constant so the sequence ee Isnot geomet 228 ove Deve Pe 21584 ON NGM) a sali si-anedit aah (NTS) iy asiisoult—a9—it1 = V2+1,a constant ratio, ‘he sequence geometric. PI) see sescmatercsntnceteveons a2Example 20 Torthe geometric sequence 26,18, 54. find (a) thevalueofa (8) thevalue ofr (©) the expresion foe 7, (@) the th term @) the vale of iT, = 4374 Solution @ xa") Example 21 IT, = 12 and T, =96 are two terms of geometric sequence find the values of and rand ute them to write lovin the Bist three terms ofthe sequenc, Solution T=12=0? w Tyn6na? a a _96 prep sy= 2 Pa an3 “The geometric sequence begins: 3, 612, aa 1 Which ofthe following are geometic sequences? rt ait 362.2%. MALL. @ asta. @hhas. © LLL 2 For the geometric sequence 13,927, id {@) thevalueofa——() thevaue ofr (©) theespresson or, (€h the 1th erm ——_(@)thevalueof ki, = 650, 3 Forthe goomtrc sequence 144 48, 16,545. id: (@) thevalweota—() thevalueatr (©) theexpresion or, (@) thetothtem (6) thevalueofkir 7, = #6 4, Find the sath term of the sequence 4,6,9, 135, '5 Find the fist term and the common ratio ofthe geometric sequence in which T {6 Find the first term andthe common ratio ofthe geometric sequence in which ‘Chapter 18 Financial mathematics — 501502 7 ind the fis tee tems of gamete sequence In which (a) the sixth term is 160 and the seventh term is 320 (8 the them andthe ght xm = £8 tap, Spand ap ~ ae secre ofa omer eens find the ala op. 9 k+3,ske Land ak 3 3 2 2 an oo cies o3 ae three successive terms ofa geometric sequence, then the value of is 10 For-xand, iti given that 1, and yform an arithmetic sequence while 1, yand x form a geometric sequence. Find the vale of and y. 14. The frst two terms of a geometric sequence are V7 + V5 and V7 — V5. Find the common ratio, expressing in ‘ssinpest sod form with a rational denominator 412 The population ofa certain town s 10000. Ite population decreases each yearby 10% ofthe population in the preceding year, ind the population inS years time. 18. ‘The valu ofa car when new is $0000 It depreciates atthe rate of 15% ofits value at the beginning ofeach yest. ind its value ae 6 years. 414 Given that aaa, a. sa geomet sequence, show thatthe sequence log a log a. loga logan arithmetic 418 Find a number which, when add to each of 2, 6,1 gives three numbers in geometric sequence. 16 Ina homogeneous nutrient medium the numberof bacteria present doubles every hout If there ar intl 200 bacteria present, how many wl be present after: (@) hours ©) 10hoast (6) Tether sre N bacteria present after thours, write down a formula that gves the number of bacteria presenter thours. 17 Thetsotope caxbon-1! suse in the treatment of ances thas a ale of 20 minotes.This means that fer 20 minutes only hal the inital amount of carbon-11 remains. (a). What faction ofthe inital dose ofearbon-11 remains after 1 hour? {b) When wil ther only be 0.025% of the inital dos ein patients body? 418 The population of acolny of wading birds is decreasing by 15% each year. The inital population is 3000 bis (a) Find how many binds main afer 5 yar (to the nearest thousand), (0) Find when the population sequal to 9000. (6) Sketch the graph ofthe population asa fanetion of time, Peaks erent |A geometric sets east of terms in which each term is frmed by maltiplying the preceding term by constant number. the series starts with the frst term, which is usually denoted by . The constant multiple scale the ‘common ratio snd is usally denoted byt “The ‘sum tom terme’ of geometric serie i given by 5, +The nth term ofthis eres tartar + tae + the common ratios given by + Also note that TATA Tyo tT, You cll, the sm to term ofthe sere, Ths is finite series, New Senior Mathematics Advanced for Yeats 11 812S21, 41,414.04 7+ oinaminfinte geomet sei aig gma notation, weheve: — §,= hor"! Thus 7, = and 7,= ar" is ‘Sum of a geometric series ‘Youn objaina formals fr, s0 that you don aways ave tad the ermsto find the um Wit Smatersar stat) [I] Mulpiybothsidesof{1] y= 5, ‘ar ar" [2] UI-Bk s- S\d-D=at-r) Hence: $=? fore ‘Alternatively finding [2] [1] gives: §,= forr>t Note that when r= 1, the series Becomes a+ a+ a+... to tems and §, =a Itisalso important to realise that =, ,+ 790 T,=8,—8, > 1 ‘Summary of formulae + a-ar-ar'+ ar" ina geometric series + risthe common ratio Tac Ta a(r"-1) oH tore Example 22 Find the sum ofthe ist eight terms of the geomet series 3+6+12+ Solution 423,122 Example 23 Forthe series 4+24+ 1+. find S,and Sy, Solution 1. so the series is geometric with a=4 and r=} ind = 4,30 the series is geometric with a=4.and r= 4. Chapter 18 Financial mathematics $03oh) wa ( 0 Soa(t-iga) (te 1023 _1023 _ 5127 024 128 “7128 fete ont ee ereere epee Ta nepmtts-i(- Jere... 7 s-00-G0) Brn 11 ind the sum of the ist sic terms ofthe series 446-494 2 ind the sum of the ist ten terms ofthe series 8—4-+2~ the sum ofthe frst ten terms ofthe series 2+ 2/5 +6 A 2o(J5+1) Brey & 24a(yS+1) DB _ 124(5+1) 1 4 Brat the series 16-8:44=2+ 5 Find the sum of nine terms ofthe series 3439-437 at ds’ 8x! are x+ 22142" 5 82° bind the sum of terms and evaluat the sum when 6 The est four terms ofa seri st te msands 7 How many terms ofthe eres 6+3-+3+.. mabe ako gi a sum of 157 Inte wheter ech sateen belo ea cot or incre tp nig this oben, Lg) Beit) @ bau® @ ne @asret @ Wend) @ ban wns 8 inthe sam fhe fisten ems ofthe seri og 3 Hoy6 +g 2+ © Tes ofthe fright es of geomet essen icc um ff ters ind the ‘common tia 10 An Ati of pe fled lng tang dad then ct cet sets Ad pape Eachshnt of snd papers fed lng longs and thon etic wo seo A soe pape ‘hspocesrepsted many es (a) ow many shes of Asin paper ae cred? {b) You have cleven sheets of AO-sized paper. You cut each sheet into one of the eleven different sizes AO, Al, 12s Al cena nany set of exh ie a pone om ech te of 0) How nay sett AIO cet (il) You stack all the sheets of paper on top of each other. with the AO sheet on the bottom and_ the A sets en top. How any hws paper ee in thet (a poceaf0n hrsofAt paper Sm hk print high te ack hes npr? 1 Finds sum oftheir seven tems ofthe srs 2+10@43 +16, 3+ New Senior Mathematics Advanced for ears 1 & 12Rrra koncert) InFxample 2 you observed that fora =4r= 5-45, appears that as increases, $,=7 + faction less than 150 that as 11-9, S, + & Because the series approaches limiting value, itis suid that i converges. ‘You can define the limiting sum of, ‘Consider a piece of string 8em fon. tis rimmed so tha the fist piece cutoffs em lng. the remainder is then ut in al otha the next piece i 2em long The remainder is then cut in half so tha the next piece i Lem Tong, and so on. You can imagine that there wil always bea plce lft over to be cut in half again, however sll: Butas ‘the umier of pieces cutoff becomes increasingly large, ther total length wil et loser and closer to 8. That is at searztittele ce a(t") ‘You have seen that, 1 then »” >» and thet iso limiting sum othe geometec series doesnot converge f Example 24 ‘Auber balls draped rm lh 20m, ach ine sts the groud it ebounds to ofthe ght of fh evi Ger ul ener of aera Solution eee or the upward matin: Example 25 ind the values of for which the series 1+(x—3)"+(¢—3)"+ converges Chapter 18 Financial mathematics 505506 Solution For the series tobe geometric, a= 1 and r= (2—3). Series converges fr <1: @3 1.015" + 100 1.015"(100 ~75) = 100 1015 ey 1013 =o, toe Tog. 015-934 Georga woud take 94 months (7 yeas 10 months to pay off the oan. The fn payment is ks than $100 (6) Asfor pare (b, but ceplacing the repayment value 100 with 200 Salve; 0.015% 5000> 1,015" ~ 200 x 1.015" +200 1Lo13"200 ~75) Georgia would take 32 months (2 years 8 month) to payoff the lun. Doubling the repayments reduces the time to pay of the loan by almost two-thirds “The terms Future Value and Present Value are frequently used in financial circles “The Future Value ofa investment is what it grows to, that is A, that has been calculated In previous examples. “The Present Value ofan investment the amount that you need to start with o obtain a particular amount in the fare This used in previous examples “These terms were used when yo looked at annuities atthe beginning ofthe chapter 41 Atthe begining of 2013, Amélie invests §1000, 1 compound interest is paid at 6% pa the vale of the investment after 8 years A $60 B vio © 159385 1049132 2 Wiite recursion relation for each ofthe falling. (a) An investment of $1000 at an interest of 3.1% withthe interest compounded annually. (©) A loan of $5000 at an interest ate of 2% with the intrest compounded sb-monthly. (6) An investment of $10000 at an interest of 2.7% withthe interest monthly. ‘9 What the anual compound interest ate for the information given in each recurrence relation? @ Ay (027A, ifthe ites is charged annually © A (015% A, the interests charged six-monthly fe ay the intrest is charged monthly. 4. In 2006, 5000 students entered for a particular examination, The number inreased each yearby 20% ofthe ‘number who entered the previous year. Caeulate: (a) the number wino entered in 2011 {@) the total number who entered between 2006 and 2011 inclusive Chapter 18 Financial mathematics — S14