# Selected topics in finite mathematics/Managing your money

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## Objectives

[edit | edit source]Understanding the basics of finance and interest and applying them to real life situations.

## Details

[edit | edit source]- A
**checking account**is a bank account in which the owner can deposit or withdraw money at any time. Writing checks or using a debit card are also ways to access funds.

- A
**savings account**is a bank account that enables the owner to deposit or withdraw money at any time.

- A
**CD**is a bank account that prevents the owner from depositing or withdrawing money until a certain maturity date. Interest for these accounts is typically higher.

**Interest**is a compensation paid by the bank for the use of your money. These can be reported in two different ways. A**Nominal Rate**, also called**APR**, is the sum of 12 monthly interest payments (if compounded monthly). Or as a**Yield Rate**, also called**APY**, which is the rate of change over the course of a year.

- If
*i*is an APR, then FV=PV(1+i/m)^(nm). - If
*i*is an APY, then FV=PV(1+i)^n.

## Examples

[edit | edit source][*There is 1% compounded interest every year on an account with a $100 initial deposit, so after a year, the account will hold $101 if no additional deposits or withdrawals are made.*]

[*Give an example of benefits associated with a checking account?*]

[*Give an example of fees associated with a savings account?*]

[*2% apy for two years after a $10000 deposit= $1404*]

## Nonexamples

[edit | edit source]## FAQ

[edit | edit source]## Homework

[edit | edit source]If $1,000 is invested at 2% APY for 3 years, how much is available after 3 years? |

Solution
$1061.21 |

If $1,000 is invested at 2% APR for 3 years (compounded monthly), how much is available after 3 years? |

Solution
$1061.78] |

What is the future value of $5,000 invested at 3% APY for 7 years? |

Solution
$6149.37] |

What is the present value of a 4-year investment that matures for $2,000? |

Solution
[ |

If you need access to your money after 3 years, which is a better option? A 3-year CD at 2% interest or 4-year CD at 2.1% interest? |

Solution
[ |

If an account has 3% APR compounded monthly, what is its APY? |

Solution
[ |

If an account has 3% APR compounded daily, what is its APY? |

Solution
[ |