Financial Maths Flashcards
What are the Advantages and Disadvantages of Owning?
+Can make changes to house.
+Can sell the property if you choose to move.
-More money to pay upfront (deposit).
-Taxes may be higher.
What are Repayment Mortgages?
Mortgages that are paid over time and you pay whole total with interest divided by sections.
What is LTV (Loan To Value)?
-How much you will be able to borrow for.
-How much deposit is required.
What is Product Fees?
Charge for mortgages.
What is APRC (Annual Percentage Rate of Change)?
Interest rate (bascially the same as APR).
What is a Fixed Rate Mortgage?
It stays the same amount (not affected by inflation).
What is a Tracker Mortgage?
Moves up and down in line with inflation.
What is the Formula for Simpe Interest?
I = Prt
I = Interest amount (not rate)
P = Principle amount
r = Interest rate
T = Time in years
What is the Formula for Compund Interest?
A = P(1+r) to the power of t
A = Amount accumulated
P = Principle amount
r = Interest rate
t = Time in years
What is Inflation?
The role of increase in prices for goods and services.
How ia Inflation Calculated?
Every month the office for National Statistics collects the price of more than 100,000 goods and services from a wide range of retailers across the country, including online retailers.
-> the prices are comnined using information on average household spending patterns to produce an overall price index and it takes into account how much people spend on different items, so the more people spend on them, the more importance they’re given in the index.
What is the Consumer Pirce Index?
-It is an important indicator of how a country’s economy is performing and shows the impact of inflation on family budgets.
-It’s published each month.
-It is used by the government to adjust interest rates, tax allowance , wages, state benefits , pension ect. -> also used to help regulate prices.
-Calculated using a large shopping basket of about 700 goods and servoces people typically spend theIr money on, the content of the basket is fixed.
-The cost of the basket varies as the price of the individual products vary.
-The quantities/”weightings” of the various items are chosen to show their importance in the typical household budget.
-It measures price changes, not price levels -> expressed in the terms of price relative to a base year, when the index was gievn a value of 100.
What is CPI?
The annual rate of inflation is the percentage change in the CPI compared with the value recorded 12 months previously.
CPI (% change) or inflation rate = Current index - Index 12 months previously / Index 12 months previously x100
What is the Retail Price Index?
-It is similar to CPI, but is based on a different ‘basket’ of goods and services -> weighted according to its own unique systems.
-RPI is not as important now, but it is still used by the Government as a base for various purposes, such as the amounts payable on index - linked securities and social housing rent increases -> many employers use it as a starting point in wage negotation.
