Here you will find a concise collection of basic financial literacy problems. Visit this page directly at hunkim.com/financial
- Download a more up-to-date Financial Literacy Word document here.
- The simple interest formula is A=P(1+rt). If the annual interest rate is 10%, explain how a $1000 investment would grow over three years.
- Explain the connection between the simple interest formula above and I=Prt, where I represents the interest generated.
- The compound interest formula is A=P\left(1+\frac{r}{n} \right)^{nt}, where n represents the number of compounding periods. Suppose you borrow $400,000 for the bank for a mortgage. Calculate how much your debt grows to be if you decide not to pay in 10 years if the 3% annual mortgage rate is calculated:
- Annually
- Monthly
- Daily
- Every second
- Choose the best option:
- Pay $12,000 into your mortgage at the end of each year
- Pay $1,000 each month into your mortgage
- Pay $500 twice a month into your mortgage
- Money grows exponentially and is a function of time. M(t)=5000(1.08)^x
- What is the principal amount?
- What is the annual growth rate?
- How much money will you have in 10 years?
- How many years until you become a millionaire?
- How can you become a millionaire more quickly?