1. Dr. Amit Dave Cornell Grant Georgia Piedmont Technical College Atlanta, Georgia

2.  Importance of Financial Mathematics  Many students have very limited knowledge of personal finance.  They tend to make decision without realizing the impact of their decision on their personal finance.  Borrowing money for automobile, home, education can be a big burden if not managed properly.

3.  A survey conducted in 2008 by the US Department of Education reflects continued increases in student debt.  According to this survey, the average debt of a public university student was about $17,000 in 2004, and it rose 24% to $23,200 in 2008.  According to the US Department of Education, the national two-year federal student loan cohort default rate rose from 9.1 percent for FY 2010 to 10 percent for FY 2011 and three-year cohort default rate rose from 13.4 percent for FY 2009 to 14.7 percent for FY 2010.

4.  The average entry-level job pays $46,000 a year, and average college senior graduates with nearly $23,000 in debt.  That’s about half of the first year salary and not including other expenses like insurance, rent, utilities, car payments, etc.  These figures clearly emphasize the importance of financial literacy among students.

5.  A research study conducted by Sallie May showed nearly 85% undergraduate students expressed their desire to have a college course to teach money management skills.  Approximately 25% of high schools in the United States teach personal finance.  Average student debt for a graduating senior in 2008 increased by 24% compared to 2004. The average debt amount for graduate was $23,200 compared to $18650 in 2004.

6.  In 2008, the average debt at a public university was $20,200 - 20% higher than 2004.  In 2008, the average debt at a private non- profit university was $27,650 – 29% higher than 2004.  In 2008, the average debt at a private for- profit university was $33,050 – 23% higher than 2004.  Approximately 40-50% of the graduating kids will have less that $10,000.00 of net worth during their liftime.

7.  In 2008, 67% graduating students from a four year college had student debt; which equates to approximately 1.4 million students (27% higher than 2004).  62% graduates from public universities had student loans  72% graduates from private non-profit universities had student loans  92% graduates from private for-profit had student loans compared to 85% of the students in 2004.

8.  Students do not know enough about personal finance  They start at a younger age  There are greater temptations  They have more debt options  They have more debt in general  Student loans are more expensive  People are going bankrupt  Students start saving later  The government would not be able to support them  Not everyone is given the same chance

9.  Many students enrolled in College Algebra class will not take another math class or any business class if it is not required in their major of studies.  Majority of these students are adult students in their early to mid 20’s.  They never received any formal training in money management.  These students need guidance from some source and algebra course can be a wonderful source.

10.  College Algebra class does not include any chapter that covers financial mathematics.  Instructor must be creative in using algebraic concepts to teach financial mathematics.  Instructor is expected to be knowledgeable in personal finance.  Just about all financial mathematics calculations can be performed using algebraic formula.  The idea is to assist students to use algebraic concepts to solve problems with financial applications, which in turn helps students to make best financial decisions.

11.  The real world applications when incorporated with technology can be great motivator for students.  Students are exposed to formulas to determine monthly car payment, saving, investment, and retirement planning.  Students also work with examples on mortgage, and debt.

12.  Difference between simple interest and compound interest.  Explain the difference between regular IRA (401K) and Roth IRA.  Home loan calculations.  Automobile loan and interest calculations.  Resources for information on financial planning.

13.  Students do not know the difference between simple and compound interest.  The difference is explained with real world example.  Explain the magic of compounding.  Explain the difference between APR and APY.  Introduce them to continuous compounding.

14.  Majority of the students do not know the difference between regular IRA(401K) and Roth IRA.  The project involves creating a nest egg with regular IRA and Roth IRA. For this purpose the concept of exponent is used in the classroom.  Each student is assigned a fixed amount (500.00) for investment per year for 25 years at 8% interest rate.

15.  Students are required to use the formula FV = Future Value PMT = Payment i = Interest rate

16.  The future value of the $500.00 invested each year = $36,552.97.  Interest earned = $36,552.97 - $12,500.00 = $24052.97.  Many students do not have any idea that a small amount invested each year after year could result in such a large amount.  On top of this, the entire amount is tax free since the Roth IRA is after tax investment.

17.  Same calculation is performed for regular IRA (401K); however since the regular IRA (401K) is based on pre-tax dollars, the entire amount ($36,552.97) is taxable. The tax rate depends on the income of the individual.

18.  Students are asked to stop investing $500.00 per year after 25 years and invest $36,552.97 for another 10 years at 6% interest compounded annually.  Compound interest formula is used to calculate the future value. FV = $65,460.80

19.  An investment of $12,500 grew to $65,460.80 in 35 years.  These examples helped students understand the magic of compounding while working with algebraic concepts.

20.  Students are asked to estimate the amount they need to save today so they can withdraw a fixed amount every month, six months, or year.  The formula for Present Value of the Annuity is used to perform this calculations.

21.  The same formula is used to perform calculations for “n”, and i, where students are required to use logarithms.

22.  The examples are based on first time home buyers.  Calculations of monthly payments are based on the affordable home price for first time home buyer.  Example: Calculate the monthly payment for a $90,000 home. Loan is for30 year fixed rate at 5% annual interest with 20% down payment.

23.  The formula listed below is used:  M = Monthly payment  R = Interest rate  N = Number of years  Students are asked to try the calculations for different loan amount at different interest rate.  Students are also asked to calculate the amount of interest paid to the lender.

24.  CJ and Heather decided to establish a savings account at the SPC credit union for Taylor, their newborn baby girl, that would provide her with $48,000 college expenses at the age of 18. The manager of the credit union advised them that they can deposit a certain amount at 10% compounded semiannually to reach their goal. How much money would they need to deposit in her savings account?

25.  P = unknown amount to be deposited  A = $48,000, I = 10%/2 = 0.05, n = 2 x 18 = 36  Therefore, P = A(1 + i)^(-n) = $48,000(1.05)^(-36) = $48,000(.172657415) = $8,287.56

26.  www.kiplinger.com www.kiplinger.com  www.money.com www.money.com  www.cnnfn.com www.cnnfn.com  www.cnbc.com www.cnbc.com  www.daveramsey.com www.daveramsey.com

27.  Azimova, M. (2010). Student Debt and Financial Literacy, Business Today online Journal, Retrieved on March 27, 2013  Quick Facts about Student Dept (2010), http://projectonstudentdebt.org/files/File/Debt_Facts_and_Sou rces.pdf. Retrieved on March 26, 2013  Walsh, K. (2011). 10 Reasons Why Schools Should Be Teaching Financial Literacy To Our Kids, http://www.emergingedtech.com/2011/04/10-reasons-why- schools-should-be-teaching-financial-literacy-to-our-kids. Retrieved on March 28, 2013   Default Rates Continue to Rise for Federal Student Loans (September 30, 2013)  http://www.ed.gov/news/press-releases/default-rates-continue- rise-federal-student-loan. Retrieved on October 3, 2013 