·        Utility Bills

Telephone, Gas  and  Electricity bills usually have a standing charge, plus

a cost for each unit used. VAT is payable on top of this.

 

 

Meter Reading		Number of units used	Cost per  Unit  ( pence)	Total     £
Present	Previous
95880	90880	5000	5.43	271.50
			Service Charge	27.80
				299.30
			VAT  8%	23.94
			Total Due	323.24

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of units used = Present reading  Previous reading

Total charge for units = Number of units used x Cost per  Unit

VAT is payable on the whole bill

 

 

·        Loans

 

   Secured Loans  If you default on payments, your house is at risk.

  Unsecured Loans  The goods bought are yours. Your house is safe.

  Hire Purchase  The goods bought are not yours until the last payment has been made.

  Mortgages  Secured loans for Houses, Ships, etc.

 

Example

 

Joe Bloggs wishes to borrow £10,000.

Which of the following  options is the cheapest way to borrow ?

 

 

Table 3 EasyLoan Secured Loans

Amount of loan	180 months		300 months
	Monthly	Total Repaid	Monthly	Total Repaid
£10,000	£96.35	£17,343	£78.08	£23,425
£30,000	£289.06	£52,030	£234.25	£70,276
£50,000	£481.76	£86,717	£390.42	£117,127
£75,000	£722.64	£130,075	£585.64	£175,691

 

 

 

Table 4 : Unsecured Loans R us

Amount of loan		3 years		5 years
		With protection	Without protection	With protection	Without protection
£5,000	Monthly Total	£181.51 £6534.21	£154.48 £5,561.28	£124.19 £7,451.15	£99.12 £5,946.72
£10,000	Monthly Total	£363.02 £13,068.41	£308.96 £11,122.56	£248.38 £14,902.35	£198.23 £11,893.56
£15,000	Monthly Total	£540.03 £19441.11	£461.30 £16,606.57	£367.96 £22,077.47	£295.11 £17,706.07

 

 

 

 

 

 

 

 

The cheapest way with EasyLoan  costs  £17,343 for 15 years .

The cheapest way with Loans R us    costs £11,122.56 for 3 years (unprotected.)

 

Fred’s Finance costs

 

 

 

 

Cheapest method is with Loans R us  for 3 years (unprotected.)  

 

 

Hire Purchase Example

 

A television costs £600 cash.

It is available on HP for a 10% deposit

followed by 36 monthly instalments of £ 15.25

 

How much cheaper is to pay cash ?

 

 

HP Price

Deposit       10% of £600   =    £   60.00

Instalments  36 x £15.75   =     £ 567.00

                         Total paid        £ 627.00

 

Cost of borrowing   =  £ 627.00 - £600

                                = £27

 

It is £27 cheaper to pay by cash.

 

 

 

 

 

 

·        Insurance

 

All insurance policies are based on the probability that a certain event will not happen.

The higher the probability is that an event will happen , the higher the  insurance premium.

 

 

Example

 

Bodgit Insurance offer house cover at a premium of £3.50 per £1000.

How much does it cost to cover a £189,000 house  ?

 

Premium = £3.50 per £1000

House value = £ 189, 000

Cost of cover = £ 189,000 ÷ 1000 x £3.50

                        = £661.50

 

 

 

 

 

 

Bank Interest

·        Simple Interest

Simple interest gives you a percentage return based purely on your original capital.

 

Example

Calculate the simple interest on   £500 for 3 years at 6% per annum.

 

     

·        Compound Interest

 

Compound interest uses the interest earned to increase the capital,

thus increasing interest.

 

Example

 

Calculate the compound interest on   £500 for 3 years at 6% per annum.

      

 

·        Foreign Exchange

 

 

 

Fred wishes to convert £150 into US dollars.

The exchange rate is £1 = $1.92, with no commission.

How many dollars does he get ?

 

No. of dollars = 1.92 x £150 = $288

 

Fred wishes to convert $150 back into pounds sterling.

The exchange rate is $1 = £ 0.52,  with no commission.

How much  does he get ?

 

Amount of pounds sterling = 0.52 x $150 = £ 78

 

When Joe converts  $150 back into pounds sterling, he receives £78.94.

There was  no commission.  What was the exchange rate ?

 

Exchange Rate = 150 ÷ 78.94 0 =  $ 1.90 to £1