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8.7 HALF A MILLION DOLLARS FOR LUNCH? - FINANCIAL MATH, SIMPLE MATHEMATICS, EXAMPLES FOR PERSONAL FINANCES

TAKE OUR MONEY-SAVING MATH QUIZ

== 1. A shoe store says it is holding a half price sale: buy one pair of shoes at full price and get the second pair at half price. What is the actual discount that the store is offering?

== 2. A long distance service will give you 10 cents a minute 24 hours a day but you must pay a $5.00 monthly fee in addition to any charges for calls. Another long distance service offers you 12 cents a minute 24 hours a day, but with no monthly charge. Question: how many minutes must you call each month for the first service to be less expensive than the second?

== 3. A worker likes to get out of the office to buy lunch every day. Lunch costs him or her $5. If the worker orders lunch 50 weeks a year, five days a week, how much does lunch cost after 20 or 40 years? If this were invested at 10% interest what would it be worth? (10% is the average long term return for the stock market.)

ANSWERS

== 1. It is really a quantity discount (for buying two pairs) of 25% per pair.

== 2. To find the answer do this. 12 cents - 10 cents = 2 cents. 500 cents ($5) divided by 2 cents = 250 minutes or 4 hours 10 minutes. The total time of your monthly calls must be greater than 250 minutes each month for the first long distance service to be cheaper.

== 3. $5 X 5 (days in the week) X 50 (weeks a year at work) X 20 years = $25,000. 40 years = $50,000.

====== 20 years at 10% interest = $79,763

====== 40 years at 10% interest = $664,269

(Remember that $1 will be worth much less in 40 years due to inflation. However, lunch will cost more in 40 years, so that the savings should stay even with inflation.)

Calculation were made using a HP financial calculator.

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