Understanding the Mathematics of Personal Finance

APPROXIMATIONS

We frequently don ’ t need to know an answer to many decimal places. When we give someone directions to drive to our house, we usually say something like, “Get off the highway at exit 14, go right and follow the road for about 12mi until you see an old church on the right.”

We could have said “Follow the road for 11.87 mi” but “about 12” gives enough information to tell someone when to start looking for the church. I don’t need to delve into the theory of approximations. Instead, I’ll use some commonsense rules, such as “about 14 mi” means that the number is closer to 14 than it is to 13 or 15.

The mathematical expression
means that “x is approximately equal to 14.” Other ways of writing this are x ~ 14 and x = 14.

The number 2,123,774 has seven significant figures. It is approximately 2 million. I have to be careful, however, not to say that the number is approximately 2,000,000 because when I do this I am implying that I precisely know all the digits I put down: that is, that the last digit is indeed 0 and not 4.

All of the above issues are resolved by using a notation sometimes called “sci­entific” notation, which specifies exactly how many digits of a number are known and how many are just place keepers (zeros to the left of the decimal place). For the purposes of this book, I’ll be careful just to use commonsense approximations and not worry about the mathematical implications.

Another name for approximating is rounding. When I know a currency amount to the nearest penny and I round it to the nearest dollar, I’ m approximating the amount to two fewer significant figures than I started with. The rules are simple. If the amount after the decimal place is 50 or less, just drop this amount. If the amount after the decimal place is 51 or more, add 1 to the number of dollars and drop the amount after the decimal place. A few examples:

$151.23 rounded to the nearest dollar is $151.

$26.76 rounded to the nearest dollar is $27.

$315.00 rounded to the nearest dollar is $315.

You can also round to the nearest ten dollars, to the nearest million dollars, and so on. For example,

$514,676.26 rounded to the nearest hundred thousand dollars is $515 hundred

thousand dollars—not $515,000.00 or $515,000.

Rounding to the nearest billion dollars is usually restricted to members of Congress.

Добавить комментарий

Understanding the Mathematics of Personal Finance

PAYING OFF A LOAN VERY SLOWLY

This section uses a little math, but I’ll go through it slowly in small steps. As with the previous section, this section is not necessary if you don’t want to …

Taxation and Inflation

John Lennon once said, “Life is what happens to you while you’re busy making other plans.” Both taxation and inflation, it seems, are parts of life—they happen to you while …

PARI-MUTUEL BETTING

The pari-mutuel machine system used at race tracks offers a different approach to gambling. A roulette wheel owner is never sure what his or her daily operating cost will be; …

Как с нами связаться:

Украина:
г.Александрия
тел./факс +38 05235  77193 Бухгалтерия
+38 050 512 11 94 — гл. инженер-менеджер (продажи всего оборудования)

+38 050 457 13 30 — Рашид - продажи новинок
e-mail: msd@msd.com.ua
Схема проезда к производственному офису:
Схема проезда к МСД

Партнеры МСД

Контакты для заказов шлакоблочного оборудования:

+38 096 992 9559 Инна (вайбер, вацап, телеграм)
Эл. почта: inna@msd.com.ua