AP Business with Personal Finance · Summary

Unit 3, Part 1 summary

  1. Monthly saving = (goal - amount saved) / months. Pay yourself first, and keep an emergency fund of a few months of essential costs.
  2. Simple interest = principal x rate x time. Compound balance = principal x (1 + r) to the power n; compounding more often raises the APY.
  3. Real return ≈ interest rate - inflation rate. Bank and credit union deposits are insured up to 250,000 dollars per depositor, per institution, per ownership category; stocks and funds are not.
  4. Credit cards are revolving credit; car, student and home loans are installment credit. Monthly card interest ≈ balance x APR / 12.
  5. Payment history and amounts owed matter most in a credit score. Utilization = card balances / credit limits. Checking your own score does not lower it.
  6. Total loan cost = payment x number of payments; total interest = total cost - amount borrowed. A longer term lowers the payment but raises the total.
  7. Debt-to-income = monthly debt payments / gross monthly income. The avalanche pays the highest rate first; the snowball pays the smallest balance first.