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April 20, 2024, 09:42:43 am

Author Topic: Sequences and Series: Tackling the Financial Math Questions  (Read 10222 times)  Share 

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jamonwindeyer

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Hello everybody, another guide for you today, this one on sequences and series! Since this is a relatively small part of the course, it will be a bit shorter than normal, but be sure to read it anyway! BOSTES like to mix it up in this section. Remember to register and ask a question below, and check out the notes for both 2U and Ext 1, which go into lots more depth and are an awesome resource if you are in need of extra revision. Right, without further ado, lets go!

First thing you should know is the difference between an arithmetic series and a geometric one. An arithmetic series is where the next term is obtained by adding a common difference (+ or -), and has the following formulas which apply:



A geometric series is a series where the next term is obtained by multiplying the previous term by a common ratio, with the following formulas:



The first tip, make sure you apply the correct formula!

Many questions in these sections are straightforward, such as this first example.

Example One (2014 HSC): Evaluate the arithmetic series 2 + 5 + 8 + 11 + ··· + 1094.[/b]
An easy two marks, like many arithmetic questions. A simple use of formula, they will rarely get more complex than rearranging to find a variable.



Also remember the cool shortcut for finding the sum of \(n\) terms of an arithmetic series:



This is easy to prove (in fact, they could ask!).

Geometric sequence questions can get nastier, and there is no better example of that than the financial mathematics style questions. There are various types, but let's go through one from last years paper.

Example 2 (HSC 2014): At the start of a month, Jo opens a bank account and makes a deposit of $500. At the start of each subsequent month, Jo makes a deposit which is 1% more than the previous deposit. At the end of every month, the bank pays interest of 0.3% (per month) on the balance of the account.
 
 a) Explain why the balance of the account at the end of the second month is

These questions can really difficult to interpret and manage. Let's break it down step by step, which is exactly what you should do in the exam.
At the start of the first month, she deposits $500. On the last day of that month, she receives 0.3% interest, so the balance (B) is:



On the first day of the second month, she adds $500 plus 1% more, so:



At the end of that month, 0.3% interest is applied to the whole account, so:



Taken through step by step, this is actually not a terribly difficult proof. The hard part is when it has to be generalised, but start by doing a simple breakdown like this. Perhaps do one more to show that after three months:



This should make the general case more obvious.

(b) Find the balance of the account at the end of the 60th month, correct to the nearest dollar.

For sixty months:




Spotting that GP is tricky, but it will ALWAYS be there. Those three lines of working, which, neglecting the tricky numbers, is essentially just using a formula, was 3 marks! Super easy, once you get the hang of correctly interpreting the question.

The last piece of the puzzle is limiting sums. Arithmetic progressions all tend to infinity as they go on, but GP's may not. Those that don't have what is called a limiting sum, and it occurs when:



You could be asked a variety of things, but all of them are easy in comparison to the financial math questions. Time is better spent there, but limiting sums were worth about 6 marks in my paper, pretty sizeable! Don't forget them. The formula you need is below:



So that's about it! A short part of the course, with some of the easiest (and hardest) marks you'll receive in the exam! Be sure to ask any questions below, or head on over to the new question forum and see if you can get some help, or even give some! Be sure to check out the notes, check out the forums, check out everything! It's an awesome community with heaps of stuff to help you guys succeed  8)

A GUIDE BY JAMON WINDEYER
« Last Edit: March 31, 2017, 08:40:39 pm by jamonwindeyer »

Phillorsm

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Re: Sequences and Series: Tackling the Financial Math Questions
« Reply #1 on: February 24, 2016, 07:23:07 pm »
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Hey Jamon, some of the formatting in this guide is a bit weird. Would you mind fixing it up please? Thanks. :)

jamonwindeyer

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Re: Sequences and Series: Tackling the Financial Math Questions
« Reply #2 on: February 26, 2016, 11:24:43 am »
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Hey Jamon, some of the formatting in this guide is a bit weird. Would you mind fixing it up please? Thanks. :)

Should be fixed now! The site upgrade has caused compatibility issues with LaTex, hence the weird formatting. If you spot any more let me know, cheers for the heads up!

angela99

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Re: Sequences and Series: Tackling the Financial Math Questions
« Reply #3 on: May 24, 2016, 06:27:39 pm »
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this is great.. was having a bit of trouble with the more complicated wordy series questions

anotherworld2b

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Re: Sequences and Series: Tackling the Financial Math Questions
« Reply #4 on: January 06, 2017, 06:50:04 pm »
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Hi Jamon,
I had a quick question what exactly do you mean in this part of your guide?
Also remember the cool shortcut:



Which is easy to prove (in fact, they could ask!).

A GUIDE BY JAMON WINDEYER

I had another quick question about limiting sums so basically if it is outside  -1 < r < 1 sum to infinity does not exist?



RuiAce

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Re: Sequences and Series: Tackling the Financial Math Questions
« Reply #5 on: January 06, 2017, 08:47:39 pm »
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Hi Jamon,
I had a quick question what exactly do you mean in this part of your guide?
I had another quick question about limiting sums so basically if it is outside  -1 < r < 1 sum to infinity does not exist?
That's for an AP. -1 < r < 1 is for a GP. Just check if you accidentally read/quoted the wrong section.

jamonwindeyer

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Re: Sequences and Series: Tackling the Financial Math Questions
« Reply #6 on: January 07, 2017, 10:18:25 am »
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Hi Jamon,
I had a quick question what exactly do you mean in this part of your guide?
I had another quick question about limiting sums so basically if it is outside  -1 < r < 1 sum to infinity does not exist?

Hey! That first bit is another formula for finding the sum of an arithmetic series: The \(l\) represents the last term in the sum you are finding, everything else has the standard meaning!

Yep, so if \(r\) isn't inside the the range \(-1<r<1\), then the sum to infinity has no bound. That is, it will just tend to infinity - We can't write its value down because it will never stop growing :)

I made an amendment to the guide above, it was a little ambiguous ;D

katnisschung

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Re: Sequences and Series: Tackling the Financial Math Questions
« Reply #7 on: January 19, 2017, 03:29:01 pm »
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Jamon u legend!! these questions always tripped me up
get me out of here

jamonwindeyer

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Re: Sequences and Series: Tackling the Financial Math Questions
« Reply #8 on: January 19, 2017, 04:55:41 pm »
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Jamon u legend!! these questions always tripped me up

I'm glad it was helpful! I know, they are awful aren't they :/