Math 11AW Unit 6: Financial Services
Math 11AW Unit 7: Financial Services. Name: _________________ Date: _____________ Block: ______
Getting Started.
1. Complete the chart.
[pic]
2. Evaluate to the nearest cent.
a) 5.5% of $90 b) 0.9% of $850
= __________________ = __________________
= _____________ = _____________
3. Evaluate.
a) 250 + (3% of 250) b) $1500 + (8.5% of $1500)
= __________________ = __________________
= _____________ = _____________
4. Complete the chart for interest compounded daily.
[pic]
5. a) Eric and Kay each invest $14500 at 1.95%/yr for 90 d. Eric earns simple interest. Kay earns interest compounded daily. How much interest does each person earn?
Eric: I = Prt
= ____________________________
Eric earns ____________ in interest.
Kay: A = P(1 + i)n
= ____________________________
I = __________ - $14500, or _____
Kay earns _______________ in interest.
b) Why did Kay earn more interest than Eric?
______________________________________________________________________________
6. Each year, Kathy spends about $4000 at a local store. The store offers two membership plans:
• Plan A: Pay $45 and get no discount on any purchases.
• Plan B: Pay $100 and get a 2% discount on all purchases.
Which plan should Kathy choose? Explain.
7. Damien has a job as a nature guide near Prince George. He is buying $200 worth of fishing tackle.
Today, if you buy $250 worth of tackle, the store will reduce the price by 25%.
Will Damien save money if he spends another $50? Explain.
$250 – _______ % of $250 = $ ____________
Math 11AW Unit 7: Financial Services. Name: _________________ Date: _____________ Block: ______
Lesson Notes 7.1: Credit Cards.
Try these:
Circle the lower annual interest rate.
i) 19.25% or 19.255% ii) 18.05% or 18.5%
iii) 12.79% or 12.7%
Key words:
Credit: the ability to borrow money
Revolving balance: a balance that goes up and down
Finance charge: the cost of using credit
When you use a credit card, you borrow money. Each month, you receive a balance statement.
• You need to pay the balance by a certain date. The date is named on the balance statement.
• This period of time is called a grace period. If you do not pay within the grace period, the company charges interest.
Some credit cards have a revolving balance. That means you can make a minimum payment instead of the entire balance. But if you pay less than the entire balance, you pay a finance charge. This chart shows information about different types of credit cards.
[pic]
A bank or company is more likely to give you a credit card if you have an income and a good credit rating. You earn a good credit rating by using credit wisely.
Example 1) Rita works as a medical office assistant in Hay River.
• She has a good credit rating and a job.
• She would like a no-fee credit card.
• She plans to pay the entire balance monthly. She may need longer to pay off larger purchases.
Which type of credit card should Rita apply for?
Solution
A. Check the features you think Rita would prefer.
[pic]
B. Which card should Rita choose?
Rita should choose a __________________ credit card.
Example 2) Bob received this credit card statement.
Bob makes only the minimum payment. He makes no other purchases.
• How much will Bob owe for the next statement in 31 d?
• How much interest will Bob be charged?
Solution
A. What will be the unpaid balance?
$944.95 – _________$ = $ ____________
B. How much interest will Bob be charged on the next statement?
[pic]
Bob will be charged$. _________________ in interest.
Example 3) Sheng Li has a $4384.76 unpaid balance on his credit card that charges an interest rate
of 19.50% per annum. The payment was due on March 23.
a) His minimum payment is $50.00 or 10% of the outstanding balance, whichever is more. What is the minimum he must pay?
b) What will his balance be on April 15?
Example 4) Daphne is charged 18.95% per annum on her credit card balances. She used her card, which had no previous balance, to make a purchase of $2198.95. She did not use the card again before her statement dated April 29.
On May 2, Daphne paid the minimum payment of 5%. On May 6, Daphne took a cash advance of $95.10 on her credit card. If she makes no other transactions, how much will Daphne owe on her May 29 statement?
Math 11AW Unit 7: Financial Services. Name: _________________ Date: _____________ Block: ______
Assignment 7.1: Credit Cards.
1. Match each person with the credit card you suggest.
Person Card
(A) Stephen is a contractor who shops mainly (C) standard
at the local home improvement store.
(B) Claudine has never had a credit card. She (A) limited purpose
does not have a job. She wants a credit
card so she can build credit.
(C) Shantel is a cashier. She wants a credit card (B) secured
for occasional purchases and emergencies.
2. Jack is a sales manager in Brandon. He wants to give each sales agent a credit card. He researched this information.
[pic]
a) What other information should Jack collect?
Types of rewards, if balance revolves, if there is a credit limit, if there is a fee, if a security deposit is required.
b) On a MasterCard, interest is compounded daily. What interest is owed on a balance
of $1500 that is 60 d overdue?
A = 1500 ( 1 + [pic]) 60 = $ 1550.044, I = $ 1550.044 – $ 1500 = $ 50.44
c) Do you think it is useful to know the grace period? Explain.
Yes, to pay the balance on time, you need to know the grace period. If sales agents need to pay a bill and then be reimbursed, they need to know the grace period.
4. Sonia is a hair stylist. She wants to take a $500 course on hair
styling. She needs to pay when she enrolls.
• She would like to pay for the course before February 3.
• She is paid on the 24th of every month.
• Today is January 29. Her credit card issues a statement on the
2nd of each month. It has a 22-day grace period.
a) Suppose Sonia pays for the course today on her credit card. When would be the last day she could pay without paying interest? February 24
b) Suppose Sonia pays for the course on February 2. When would be the last day she could pay the balance without paying interest? March 24
c) Should Sonia pay for the course on January 29 or wait until February 2? Explain.
Sonia should pay for the course on February 2. That way she can pay the bill the day she receives it. She could use her March paycheque. The money from her February paycheque could have been invested for 22 days.
5. Jackson just started his first job as a welder in Langley. He wants to apply for a credit card.
Circle the advantages of a credit card. Cross out the disadvantages.
• build credit • easy to spend more than you have
• earn rewards • easy to make unplanned purchases
• can use in case of emergency • keep track of expenses
• lose track of money owing • interest can grow large
6. Why might you choose a card with a higher interest rate?
The card might have a lower annual fees. If you pay the balance on time, the interest rate will not matter.
7. Why might you choose a card with an annual fee?
The rewards might be more valuable than the cost of the annual fees.
8. Why is it wise to pay the full balance on a credit card?
The fees and interest rates are high. If you only pay part of the balance each month, you pay a finance charge each month. It will take you a long time to repay your debt. Paying the full balance will give you a better credit rating.
9 Sherri Lin has a $2366.75 unpaid balance on her credit card that charges an interest rate of 22.0% per annum in simple interest. The payment was due on March 15.
a) Her minimum payment is $50.00 or 10% of the outstanding balance, whichever is more. What is the minimum she must pay?
$ 2366.75 x 0.1 = $236.68, which is more than $50.00. So her minimum payment is $236.68.
b) What will her balance be on April 10?
From March 15 – April 10: 16 days + 10 days = 26 days
New balance: Assume she has made that minimum payment on March 15.
$2366.75 – $236.68 = $ 2130.07
$ 2130.07 + $ 2130.07 x 0.22 x ( [pic]) = $ 2130.07 + $ 33.38 = $ 2163.45
10. Marcia’s credit card company charges 24.00% per annum, counting each day that an amount is owed. Her only purchase was an item for $568.93. She did not pay on the due date, March 10. How much will she owe on the next statement date, April 2, if she doesn’t make any other purchases?
From March 10 – April 2: 21 days + 2 days = 23 days.
New Balance: $ 568.93 + $ 568.93 x 0.24 x ([pic]) = $ 568.93 + $ 8.60 = $ 577.53
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