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"Mathematics of Money" is New Course at Penn State

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23 March 2010

Penn State University's Department of Mathematics is offering a new course, called "The Mathematics of Money," which will allow students
to learn mathematical techniques in the context of life's financial decisions, such as those involving interest, annuities, investments, retirement plans, taxes, credit cards, and mortgages.  The course is being offered at University Park for the first time during the spring 2010 semester.  It is intended for students in non-technical majors who need credit in mathematics to meet the University's general-education requirements.

Registration for the course, Math 034, is now open for Fall 2010 via the ELION system.

"This course is important because it teaches students how to understand and use mathematical formulas to solve financial problems," said Cheryl Hile, a lecturer in the Department of Mathematics.  "The goal is to help students develop the knowledge and skills needed to make sound financial decisions."

John Roe, chair of the Department of Mathematics, cited a statement made by the U.S. Department of Treasury: "Today's complex financial-services market offers consumers a vast array of products and providers to meet their financial needs.  This degree of choice requires that consumers be equipped with the knowledge and skills to evaluate the options and identify those that best suit their needs and circumstances."  Roe said, "I am pleased that our department is doing its part to help Penn State students achieve these goals."

Some examples of the types of problems that students in the course learn to solve are:
-- A person decides that the most they can afford to pay each month for a car loan is $375.  If their credit union offers a five-year car loan at a 6 percent interest rate, what is the most they can afford to pay for a car?
-- A person would like to have $500,000 in their 401(k) account in 30 years.  How much money would they need to deposit into this account each month if they expect to earn 8 percent on their investments and anticipate an annual inflation rate of 3.5 percent?
-- A credit card carries an interest rate of 18.5 percent.  How much interest would a person owe for the billing month if their average daily balance were $745.09?

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