IB Math Studies – Topic 8
IB Course Guide Description
Currency Conversion
• Exchange rates show the relationship between
the values of currencies. They change constantly.
– The exchange rates in any country are usually given as
the amount of foreign currency equal to one unit of
the local currency.
• People by and sell international currency
– Selling:
• Foreign currency bought = other currency sold x selling
exchange rate
– Buying:
• Currency bought = (foreign currency sold) / (buying exchange
rate)
What is Commission?
• Banks and other currency traders earn a
commission for exchanging currency.
• commission rate between 0.5% to 3%
• a ‘flat fee’
• no commission, but worse exchange rates
Simple Interest
Crn
I
100
C = capital
r = simple interest rate / per
year / decimal
n = number of time periods
(in years)
I = interest
1) If $2000 is borrowed at a 8% p.a. for 3 years,
the interest payable for 1 year is 8% of
$2000, therefore it is $2000 x 0.08.
So, for 3 years it would be ($2000 x 0.08)x3
Compound Interest
• Compound interest is a method of calculating
interest in which the interest is added to the
principal each period so that the principal
continues to grow throughout the life of the
loan or investment.
This will be there for you!
How to solve using your
CALCULATOR
N: The number of compounding periods. This will always be a
positive integer.
I%: This is the 'nominal rate' for an investment, annuity or loan.
This will always be a positive integer. Write the percent form, not
the fraction or decimal form of a percent.
PV: The 'present value' of an investment, loan or annuity. This
number can be positive or negative. if the number is positive,
then it indicated money we collected as in a loan. If the number
is negative, then it represents money we paid out, as in an
investment or loan where we are the lender.
FV: The 'future value' of an investment, annuity or loan after N
compounding periods have passed. This value will be positive or
negative depending on the signs of PV and PMT.
P/Y: This value represents the number of payments per year for
annuities and loans. This must be a positive integers!
C/Y: This represents the number of compounding periods per
year. This must be a positive integers!
Depreciation
• Depreciation is the loss in value of an item
over a certain period of time.
Tables: Loan and Repayments
• Financial table: It is often used to give
information about investment or loan
repayment which enable interest amount to
be calculated without using formulae.
Investment
• An investment is an amount of money that we loan to
someone.
• The majority of time this is done through compound
interest, where the compound interest is added to the
investments.
Inflation
• The increase in prices of goods and wages.
• If inflation rate is constant over a number of
years, we can use compounded interest.
• We calculate the effect of inflation, we treat the
original price in the past as the principal and the
inflation rate as an interest rate. From then we use
the compound interest to calculate the effect of
the inflation rate on the price.
•
Bibliography
• "Using the TVM." Error. Web. 23 Apr. 2012.
<http://staff.argyll.epsb.ca/jreed/calculator/ti
83p/TMV.htm>.
– Slide 9