responses math6

Unit 6 Discussion

Brook

5/1/2014 8:22:45 AM

$2500*.12 = $300/2 = $150 interest

2500.00*1.01 = 2525.00

2525.00*1.01 = 2550.25

2550.75*1.01 = 2576.26

2576.26*1.01 = 2602.02

2602.02*1.01 = 2628.04

2628.04*1.01 = 2654.32        

$154.32 interest

While in scenario #1 you are earning 12% interest rate, this is an annual interest rate.  The term is 6 months so we cut the rate in half equaling 6%.

In scenario #2 we are earning 1% rate for a 6 month term.  The difference is we are earning interest on interest.  This is the magic of compounding.  If the interest was not compounded the total earnings would be the same between the two scenarios. 

As far as collectibles go, the values are based mostly on supply, demand and overall popularity. As the supply goes down and the demand goes up, people are generally willing to pay more for an item.  As things become scarcer the supply goes down.  People speculate this happening.  They invest in items with this understanding which in turn removes more of the items from circulation, increasing the value.  Different current events can effect the popularity of items making their values go up and down. 

Interest and Value

Alisha

5/1/2014 9:07:07 PM

For the simple interest: MV = 2500 (1+.12) = 2800

2800 – 2500 = 300

300/2 = $150

For the compound interest: A = P (1 + R)

1st $2500 * 1.01 = $2525

2nd: $2525 * 1.01 = $2550.25

3rd: $2550.25 * 1.01 = $2575.75

4th: $2575.75 * 1.01 = $2601.51

5th: $2601.51 * 1.01 = $2627.53

6th: $2627.53 * 1.01 = $2653.80

The future value is $2653.80

$2653.80 – $2500 = $153.80 is the total interest

The compound interest is gathered on the principal balance at the end of every month (plus the interest already accrued) while the simple, annual interest is gathered on the principal balance only at the end of the year. With a savings account the compound interest is a much better way to go, you can accrue more interest in the same amount of time. When paying off a loan, the simple interest is better because you’ll have to pay back less interest on the loan.

Elvis Memorabilia:

Some factors that could cause the value of Elvis Memorabilia to depreciate in the future could be a drop in demand for the products. A lot of things are bought more frequently when there is a story in the news about the person or item or if they are featured in a new movie. If neither of these things happen, Elvis will fade from people’s constant memory so his memorabilia will not be purchased as often.

An investor should ask how much money the investment will return to them and how much money it will cost to advertise and sell the item. Investors should also know what the value of the item to be invested is at the current point in time.

Someone who is a fan of Elvis may feel like they’ll never see another item like this again so they have to pay the price in order to get the item for their collection. This allows sellers to price the item however they wish because someone will always pay it. Because no more of the item can be created, yet the demand is still pretty high, each item’s value is increased.