How good is your money maths?

MSE_Martin

Hazel Eyes, the problem is calculating a personal loan interest on a calculator is very difficult - you need a spreadsheet - hence why i do it in my head as a check. This has inspired me to write a full blog on it though.

ErictheHalfaBee

Hmmm, I also get 1310 and change for E. Surely if the payments are made monthly then the interest is calculated monthly at 1.1^(1/12)-1, which is 0.797%, rather than just 10%/12, which is 0.833%? Doesn't the 0.833% (which gives the 1375 answer) ignore the fact that the amount owing reduces each month?

littlemissmoney

Thanks EricHalfaBee I worked it out two ways (a geometric progression and using goal seek in Excel) and I am fairly sure £1,310.80 is correct.

jonthedog

I get £1374.11 in excel, but maybe my working was wrong:
=PMT(10%/12 monthly interest rate, 60 monthly payments, £5000 initial value) gives a monthly payment of £106.24 which when multiplied by 60 months and the initial amount taken off gives £1374.11. Far too complicated to do in your head...Martin should have specified a £50 error margin in the question if very rough estimates were what was expected...I have wasted too much time on this!

irishwench69

I got them all...........E took a while, but still did it!!!

IW x

Martin_Edney

E has too many assumptions in it. I assumed (wrongly) that the loan was just being repaid in full after 5 years (OK, I know this is an unusual way to repay a loan, but not completely unknown).

Coveredinbees!!!!

E in your head i think not

newfoundglory

When I did my BSc in Computer Science, I did a course called computational finance. This was the hardest uni course and exam i've ever done. The course covered the basics, but was all about eliminating risk from fictitious portfolios containing shares and options, and writing software capable of performing specific calculations. Who ever said university was easy? Perhaps i should post some more challenging problems for you guys

Former_MSE_Natasha

Poll Title: How good is your money maths?

Poll Started 2 January 2007.

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. CLICK THE FIRST YOU CAN'T WORK OUT IN YOUR HEAD (ANSWERS IN OPTION F).

E. If a personal loan's £5,000 at 10% APR over 5 yrs, what's the total interest? 32.9% (1286 Votes)
D. Shares rise 10% per year for 3 years, what's the total rise? 32.7% (1279 Votes)
F. Got them all right! I.e. £90, £104, £1, 33% & £1375 (£1300 to £1400 will do) 21.9% (855 Votes)
C. Burgers cost £1.50; what's the ave. price on a 3 for 2 deal? 5.3% (209 Votes)
B. Final price if it's 20% off £130? 3.9% (152 Votes)
A. Final price if it's 10% off £100? 3.3% (131 Votes)

Total Votes: 3912

Thank you to everyone that took part and voted.