How good is your money maths?

Former_MSE_Lawrence

How good is your money maths? While being good at maths isn't a prerequisite for MoneySaving, it certainly speeds things up. So go down the following money maths questions to see which you can do. WHICH IS THE FIRST YOU CAN'T WORK OUT IN YOUR HEAD (ANSWERS IN OPTION F).

A. Final price if it's 10% off £100?
B. Final price if it's 20% off £130?
C. Burgers cost £1.50; what's the ave. price on a 3 for 2 deal?
D. Shares rise 10%per year for 3 years, what's the total rise?
E. If a personal loan's £5,000 at 10% over 5 years, what's the total interest?
F. Got them all right! Ie £90, £104, £1, 33% & £1375 (£1300 to £1400 will do)

Vote here or click reply to discuss.

littlemissmoney

For E isn't the answer £3,052.55?

(£5,000 x 1.1^5) - £5,000 = £3,052.55

MSE_Martin

Lmm - no because with a personal loan you make set monthly repayments. You're calculation is for a flat rate loan.

The way I do it in my head to get a 'rough assessment' when I want to check an answer is.


What is the rough average balance? Well on £5,000 over 5 years it will be half of £5,000 ie £2,500.

What is the annual interest on the average balance £2,500 x 10% = £250

Then you are charged this interest over 5 years so its £250 x 5 = £1250

Then as this ignores compounding, add a little bit to compensate, say £100 = £1350

And as you'll see the actual answer is £1375, so this'd been a fair estimate.

Martin

littlemissmoney

Martin read my post I love this site!!! :T

Back to the point... Assuming set monthly repayments, I make them £105.18. So interest is (60 x £105.18) - £5,000 = £1,310.80. Umm, I think I'm still missing something

P.S. Nevermind, I have voted E

real1314

I voted E, I don't think the last one can be done "in your head" as you'd have to rely on assumptions.

I'd also say that answering E is better than F as you should always look at the monthly payment rather than the rate as far as loans are concerned. Interest rates can be made to look good or bad depending on how the interest in constructed and how often the balance is re-calaculated.

arthur_dent_2

so amount owed divided by 2
multiplyed by the interest rate %
multiplyed by number of years taken out over and add a bit to compensate for the compounding of interest

Okay I think I get that.

So for the same 10 % interest rate a 5 year loan on £6000 would work out at about £1600 - £1650

MSE_Martin

Sounds good to me Arthur Dent, below is a link to a loan calculator.

Why not try out a few examples

http://money.guardian.co.uk/calculator/form/0,,603119,00.html

Murtle

nor can I read the whole description before starting as I was confused to find all the answers in F...... ah well, that was a bit of mental stimulation to keep me going.......

M

x

iwanttosave_2

I am terrible at maths Well easy maths anyway, gimme some stupid obscure sume to do and I can do it, ask me what 87+23 is and I am stumped

Damn those additional maths lessons.

I can do A,B and C though

Quasar

Ohhhh I'm happy to say that my math is good enough! :j I make it work for me when I shop and when I put my money to savings...:p

HazelEyes_3

I couldn't do the last one in my head though now Martin and "Arthur Dent" have explained a rough way to calculate it I will be able to have a go at this in future.

Though I'm not sure in what circumstances I would need to calculate this without the help of a calculator (on my phone) or pen and paper (in my handbag) - I don't take out loans on the spur of the moment.

The other calculations are ones I frequently do when shopping e.g. comparing the unit cost on a 3 for 2 offer compared to the larger size pack without any reduction.

I am so old that when I had a Saturday job in a shop we had to add up all the items - no scanning bar codes or even tills which did the calculation. Hasn't stopped me getting into debt but at least I understand my money (or lack of it!)

And I still do a "sanity check" on any calculation whether on a calculator or a spreadsheet - to check for operator error.