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Financial mathematics

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Mamello Mapena
Mamello Mapena

This document discusses key concepts in financial mathematics related to depreciation. It defines simple and compound interest formulas. It explains the two types of depreciation - straight line and reducing balance. Straight line depreciation subtracts an equal amount each year from the purchase price of an asset. Reducing balance depreciation subtracts the greatest amount in the first year and smaller amounts each subsequent year. The document provides examples of calculating depreciation of various assets like a mountain bike, 4x4 vehicle, and lawn mower using the straight line method.

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FINANCIAL MATHEMATICS GRADE 11 DPRECIATION
Formulas for increase Simple interest : A= p(1+IN)
formulas for increase; Compound interest = +
Depreciation Two types : Straight line depreciation Reducing balance Depreciation
Straight line depreciation
A=P(1-in) A= Accumulated amount P= Present Value I=interest N=number of years
For his construction business Jims father bought a truck 5 years ago for R150000. Now he wants to sell the vehicle. But the truck is worth R900000.
Assets Things we owe that are valuable or useful suchas cars and laptops
BOOK VALUE The original cost of an asset minus the depreciation
Scrap value The book value at the end of an assets life
Straight line depreciation Subtract the equal amount every year from the purchase price of an asset
Reducing balance depreciation Subtract the greatest amount from the present value for the first year and smaller amounts for each year afterwards
Example 1 Jims buys a new mountain bike for R15000. The straight line depreciation rate is 21% per year. What will his mountain bike be worth in 4 years time?
Example 2 Jims older brother buys a 4 by 4 for R385000. But after 6 years the 4 by 4will only be worth R1420000. What is the annual rate of depreciation using straight line depreciation?
Example 3 It is Jims Job to mow the lawn at home. Jims parents buy a new lawn mower for R1800. The straight line depreciation rate is 20% . How long will it take for the new lawn mower to be worth R0? In other words, find out when the lawn mowers scrap value is zero?
References Anon., 2007. 際際滷 share. [Online] Available at: /B33L4L/chapter-5-mathematics-of-finance?qid=71b8ba00-4dc6-4905-ac28- 86d654d3c3bc&v=&b=&from_search=12 [Accessed 18 September 2017]. Carter, T., 2011. slide share. [Online] Available at: /B33L4L/chapter-5-mathematics-of-finance?qid=71b8ba00-4dc6-4905-ac28- 86d654d3c3bc&v=&b=&from_search=12 [Accessed 16 September 2017]. Mbhamali, T. N., 2014. 際際滷 share. [Online] Available at: /Mbhamalitn/financial-mathematics-for-grade-10-11-and-12?qid=dd87daf9-243a-4ae2-9954- 392a76e50ff1&v=&b=&from_search=8 [Accessed 14 February 2017]. Mfuphi, L. M., 2012. 際際滷 Share. [Online] Available at: /201035224/financial-mathematics?qid=fb78e76b-962c-495f-8063- e47da3cb80ad&v=&b=&from_search=2 [Accessed 14 September 2017]. Ntuli, P., 2017. 際際滷 share. [Online] Available at: /PHINDILE_NTULI/financial-mathematics-79125178?qid=34ff6208-6030-4f42-be5f- 06732335f5e9&v=&b=&from_search=9 [Accessed 15 September 2017].

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Financial mathematics

  • 2. Formulas for increase Simple interest : A= p(1+IN)
  • 4. Depreciation Two types : Straight line depreciation Reducing balance Depreciation
  • 6. A=P(1-in) A= Accumulated amount P= Present Value I=interest N=number of years
  • 7. For his construction business Jims father bought a truck 5 years ago for R150000. Now he wants to sell the vehicle. But the truck is worth R900000.
  • 8. Assets Things we owe that are valuable or useful suchas cars and laptops
  • 9. BOOK VALUE The original cost of an asset minus the depreciation
  • 10. Scrap value The book value at the end of an assets life
  • 11. Straight line depreciation Subtract the equal amount every year from the purchase price of an asset
  • 12. Reducing balance depreciation Subtract the greatest amount from the present value for the first year and smaller amounts for each year afterwards
  • 13. Example 1 Jims buys a new mountain bike for R15000. The straight line depreciation rate is 21% per year. What will his mountain bike be worth in 4 years time?
  • 14. Example 2 Jims older brother buys a 4 by 4 for R385000. But after 6 years the 4 by 4will only be worth R1420000. What is the annual rate of depreciation using straight line depreciation?
  • 15. Example 3 It is Jims Job to mow the lawn at home. Jims parents buy a new lawn mower for R1800. The straight line depreciation rate is 20% . How long will it take for the new lawn mower to be worth R0? In other words, find out when the lawn mowers scrap value is zero?
  • 16. References Anon., 2007. 際際滷 share. [Online] Available at: /B33L4L/chapter-5-mathematics-of-finance?qid=71b8ba00-4dc6-4905-ac28- 86d654d3c3bc&v=&b=&from_search=12 [Accessed 18 September 2017]. Carter, T., 2011. slide share. [Online] Available at: /B33L4L/chapter-5-mathematics-of-finance?qid=71b8ba00-4dc6-4905-ac28- 86d654d3c3bc&v=&b=&from_search=12 [Accessed 16 September 2017]. Mbhamali, T. N., 2014. 際際滷 share. [Online] Available at: /Mbhamalitn/financial-mathematics-for-grade-10-11-and-12?qid=dd87daf9-243a-4ae2-9954- 392a76e50ff1&v=&b=&from_search=8 [Accessed 14 February 2017]. Mfuphi, L. M., 2012. 際際滷 Share. [Online] Available at: /201035224/financial-mathematics?qid=fb78e76b-962c-495f-8063- e47da3cb80ad&v=&b=&from_search=2 [Accessed 14 September 2017]. Ntuli, P., 2017. 際際滷 share. [Online] Available at: /PHINDILE_NTULI/financial-mathematics-79125178?qid=34ff6208-6030-4f42-be5f- 06732335f5e9&v=&b=&from_search=9 [Accessed 15 September 2017].