How Math And Life Is Important To Us?

One example is how math is important in finances.
If you take out a mortgage or a loan it's good
to know how the numbers work so you wont
be over charged. Also for banking when it
comes to savings accounts, and other
interest bearing accounts. Knowing
mathematics will enable you to
be able to compute your interest earned.

If you take out an amortized loan with a fixed APR for a finite period of time, there is a payment formula that can be derived by utilizing the time value of money.

Pmt = L [ r ( 1 + r)ⁿ]/ [ ((1 + r )ⁿ) - 1]

L = loan amount
r = monthly interest rate
n = number of periods financed

You are also charged finance fees for loans as well.

Finance charges = n (Pmt ) - L
Total amount paid = n (Pmt)

You can substitute Pmt + e for Pmt ( to calculate how long it will take to pay off the loan with a constant additional principle payment of e )

e = additional principle payment each period.

Solve the payment formula for n, and substitute Pmt + e for Pmt.

You may have heard of the housing crises partly due to ARM (Adjustable Rate Mortgages), and Negatively Amortized mortgages.

A negatively amortized mortgage is when your monthly payment does not cover your monthly finance charge. Therefore your principle increases with time vs decreasing.

Your mortgage loan can negatively amortize up to 15% (maybe more because this may vary from state to state).

You can get a mortgage for $200,000 and in about 5 years you can owe $230,000.
It's all about the numbers. That's why it is important to know mathematics so you
can have an understanding of financial contracts. There are many many more examples,
I just gave you a couple of them that relate to money.

Research the following topics, and find out what type of mathematics is involved.

Amortization, Negative Amortization, Reverse Mortgages, CD's, Money Market Accounts, and Credit Card Math.