Applications of Finance (AQA Level 3 Mathematical Studies (Core Maths): Paper 1: Data, Finance, Estimation & Modelling): Flashcards

The UK tax year runs from 6 April to 5 April the following year.

It is therefore not the same as the calendar year, which matters when income has to be allocated to a particular year.

Income tax is also charged on pensions, on rental income, and on interest from savings above a person's allowance.

It is not a tax on wages alone, which is why some people have to declare income that no employer ever sees.

Inflation is the increase in the prices of goods and services over time.

As prices rise the same amount of money buys less, so money loses purchasing power.

CPI tracks how the total cost of a basket of over 700 everyday goods and services changes over time.

Each item carries a weighting reflecting how much of their money consumers spend on it, so petrol counts for more than tea.

The money is worth less in real terms, because prices have risen faster than the balance has.

The balance is larger in pounds, but it buys less than it did at the start of the year.

The completed sentence is:

The base year is given an index of 100 exactly, so a CPI of 130.9 means prices have risen by 30.9 per cent since that year.

An index only ever measures change relative to its base year, never an absolute price.

False.

Someone holding a debt gains from inflation, because as money loses value the debt shrinks in real terms.

Economists generally agree that moderate, predictable inflation is good for an economy overall, since it gives people a reason to spend sooner rather than later.

Divide the later index by the earlier one, giving .

That multiplier is an increase of 4.59% to 3 significant figures, so prices rose by that much across the year.

No. The salary rose by only 3%, since , which is below the 3.9% rate of inflation.

Equivalently, keeping pace with inflation would have needed £28 000 × 1.039 = £29 092, which is more than was actually paid.

They track different baskets of goods and services, so a price change in one item affects them by different amounts.

RPI includes housing costs such as mortgage interest payments, which CPI leaves out, and RPI is generally the higher of the two.

The two indexes use different base years, so their levels are measured from different starting points and cannot be compared directly.

Only the percentage change in each index over the same period can sensibly be set against the other.

No, the rate of inflation differs from one product or service to another, partly because supply and demand differ.

UK house prices rose roughly tenfold between 1980 and 2020, while a loaf of bread rose about threefold over the same period.

The completed conversions are:

To change pounds into euros you multiply by 1.17 each time.

To change euros back into pounds you divide by 1.17 each time.

So £28 becomes 28 × 1.17 = €32.76, and €75 becomes 75 ÷ 1.17 = £64.10 to the nearest penny.

Commission is the charge a company makes for exchanging one currency into another, usually a percentage of the amount being exchanged.

It is how the exchange makes a profit, alongside offering a rate slightly different from the market rate.

True.

Each pound buys more than one unit of the weaker currency, so the same value needs a larger number of units to express it.

The number of units goes up while the value stays the same, which is why the size of a converted amount says nothing about how much it is worth.

Convert at the quoted rate first, then reduce the result by the commission, which means multiplying by 0.985.

The commission can be worked out in either currency and comes to the same value, so 1.5% of £500 is £7.50.

A provider charging no commission at all may still give you less, because its exchange rate is the worse of the two.

Only the final amount received settles which is better, so both factors have to be worked through together.

CoinGlobe, giving ¥109 998 against DoshSwap's ¥108 558.

Its better rate gives 600 × 189.00 = ¥113 400, and taking 3% off by multiplying by 0.97 still leaves more than 600 × 180.93.

A stronger currency raises the country's purchasing power abroad, so importing goods becomes cheaper.

Exchange rates drift slightly from day to day through international trading, and a dramatic economic event can move them a long way at once.

Budgeting is estimating the money coming in and the money going out for a person or a business over a period of time.

It is used to forecast how much money will be available, and so how much can realistically be saved.

Categorise every credit and debit on the statement, then total each category to give the income and the outgoings.

Comparing those two totals shows how much is left over, and where the money is actually going.

False.

Very few costs are truly fixed: utilities can often be cut by changing supplier, and a loan can be consolidated with a cheaper lender.

A fixed cost is one that does not vary from month to month, which is not the same as one that cannot be changed at all.

A fixed outgoing stays the same each month, such as rent, council tax or a loan repayment.

A variable outgoing can be adjusted from month to month, such as groceries, fuel or entertainment.

DD is a Direct Debit, an automated payment often used for regular bills.

CPT is a cash point withdrawal, meaning cash taken out at a machine.

A single month leaves out costs that do not fall every month, such as an annual car service, a yearly insurance renewal or presents at Christmas.

An urgent repair or a replacement appliance can also arrive in any month, so a realistic budget sets money aside for them.

No, it is money kept rather than money spent, so it leaves the current account without leaving the person.

It still has to appear as an outgoing, because otherwise the budget would not balance against the account.

A budget makes the spending objective, by showing the true amount and the proportion of income that each category takes.

Someone may feel they spend a sensible amount on clothes until that figure is set against what they earn.

The equals sign tells the spreadsheet that what follows is a formula to evaluate, rather than text to display.

Without it, typing B1+B2 would simply appear in the cell as those five characters.

A cell reference identifies one cell by its column letter followed by its row number, so C6 is the cell in column C, row 6.

Columns are always labelled with letters and rows with numbers, and the letter comes first.

That formula adds up the values in every cell from A3 to A8, which is six cells in total.

The colon means "through to", so SUM covers a whole range rather than a list of separate cells.

False.

A spreadsheet applies the ordinary order of operations, doing powers, then multiplications and divisions, before any additions and subtractions.

That is what allows a calculation to be typed in exactly as it is written on paper.

The new balance is the previous balance plus the interest added, minus the payment made, so the formula is =E2+C3-D3.

The addition and subtraction are worked through from left to right, which gives the right answer here without needing brackets.

A spreadsheet uses an asterisk for multiply and a forward slash for divide.

So four times the value in cell C6 is written =4*C6, and cell B7 divided by cell D8 is written =B7/D8.

A formula written with references recalculates automatically whenever the values in those cells are changed.

Typing the numbers in instead freezes the answer, so it stops being correct as soon as anything is edited.

Divide the current balance by the original one and multiply by 100, giving =(E7/E2)*100.

The brackets force the division to happen first, and the multiplication by 100 can be dropped if the cell is already formatted to show percentages.

The interest added is the balance multiplied by the monthly rate, so the formula is =B3*E2.

Either order works here, since multiplying gives the same answer whichever cell is written first.