M133 Term Paper - Spring 2000

Every student in M133 must complete a term paper, which counts 100 points (10%) of the course grade. The paper is due Monday, May 1, which is the beginning of the last week of classes. The requirements are as follows.

Technology

The paper should be word-processed and printed neatly, with double spacing and a reasonable font size. If you have trouble displaying the mathematics or graphics that you want to include, please consult Professor Manvel for advice.

Length

The paper should be at least 1000 words, which is about 4 pages double-spaced with a reasonable font, but no longer than 3000 words.

References

You should consult at least two references, which should be noted in standard (any standard is fine) format at the end of the paper. In the body of the paper either footnotes or informal references (for example [Eves, page 232]) are fine. The writing should be your own, inimitable, work. If you gather information on the web I expect you to paraphrase it and give a reference, unless you include direct quotes with references.

Soft Copy

If you write a particularly strong paper, I will ask permission to post it on the M133 web site for future generations of M133 students to admire. With that in mind, I ask that you turn in a floppy disk with a copy of the paper on it when you turn in your hard copy.

Content

You can write about any topic that includes both mathematics and finance. Standard things that have worked well in the past are enumerated below. Please speak to me briefly if you have a radical idea, so I can give you an estimate of your chances for a successful paper before you invest too much time.

1. Investigate the costs of renting a house and buying a (comparable) house in Ft. Collins. You might do this with a realtor or on the Web. You should figure the costs of borrowing money, utilities, insurance, taxes, etc. Your commentary might address advantages and disadvantages of the alternatives, financial and otherwise. You might want to include an informed guess on the appreciate potential of real estate here, and don’t forget about closing costs and commissions for selling. Use a 5-year time framework (i.e. assume you will rent or own the house for 5 years.)

2. Compare buying and leasing a car in Ft. Collins. Find out the initial costs, the continuing costs, and the ending costs (or benefits) of each alternative. Focus on one type of car to make the comparison direct. Talk to an auto dealer to get the correct information. Write it up and present it in a spread sheet to allow direct comparisons.

3. Evaluate Universal Life or Whole Life insurance as an investment alternative. Talk to an insurance agent or agents and get rates and benefits for various policies. Compare to the cost of Term insurance to evaluate the investment aspect of the policies. Construct a spreadsheet which shows expenses and benefits of each type of policy, and calculate the return of each.

4. Calculate the monetary value of your college education. Make careful estimates, based upon researched statistics from our area, of your earning potential with and without a college degree. Choose a reasonable line of work for each alternative and compare the value (considering the time value of money) of your earnings for life with and without a college education. Figure in lost earnings and costs of college to find out what return you can expect to get from your college investment.

5. Research the CPI (consumer price index). There are entire Web sites devoted to this topic, not only giving the index for every year but also describing how it is calculated and how it changes over the years. Describe several things that affect you which are tied to the CPI. Discuss how well or badly the CPI actually measures the effects of inflation. Set up a spreadsheet that compares the price variation of several articles over time and construct a index using those prices.

6. Research the price variability of stocks and bonds over the last 25 years. Collect data on average prices and expenses involved in investing in stocks and in bonds, both with a regular broker and over the internet. Assemble a portfolio of stocks and a portfolio of bonds and follow the prices of each over a one-year period ending this October 1. Discuss the advantages and the disadvantages of investing in stocks versus investing in bonds.

7. Go surfing on the Web and find some sites that are useful in answering questions such as those listed above. Describe where you have gone, and use those sites to actually analyze or investigate several such problems. Describe both the problems and the mathematics involved, and evaluate the quality of the information provided by the Web sites.