8: Finance
- Page ID
- 62008
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- 8.1: Simple Interest
- In this section, we introduce the most straightforward type of interest: simple interest. One real-world example of this is bank certificates of deposit (CDs). As we begin exploring financial questions and equations, we also introduce symbols that will be used throughout the chapter.
- 8.2: Compound Interest
- Unlike simple interest, which is applied once per year, compound interest is applied any number of times in regular evenly-spaced intervals. For example, one twelfth of your annual interest rate might be applied every month. In addition, unlike simple interest, any interest already accrued in an account begins to accrue its own interest!
- 8.3: Annuities
- Building on the concept of compound interest, this section discusses situations in which money is regularly and repeatedly deposited into an account. More specifically, money is repeatedly deposited and the deposits all earn compound interest. For example, depositing a fixed dollar amount each month to your 401(k).
- 8.4: Payout Annuities
- In this section, we discuss the mathematics of regularly withdrawing equal amounts of money from an account that earns compound interest. For example, suppose you want to withdraw $2000 a month in retirement. How much money should you save?
- 8.5: Loans
- The mathematics of loans is discussed in this section. When you take out a loan, you typically pay it back in regular installments via a process called amortization (regularly-spaced equal payments). The equations and formulas in this section will help you understand mortgages, car loans, and other situations.
- 8.6: Remaining Loan Balance
- With loans, it is often desirable to determine what the remaining loan balance will be after some number of years. For example, if you purchase a home and plan to sell it in five years, you might want to know how much of the loan balance you will have paid off and how much you have to pay from the sale.
- 8.7: Which equation to use?
- This section contains an overview of the chapter from the perspective of choosing the right financial formula for a given problem.