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Venture Capitalist

Real-Life Activities

Real-Life Math

You are a venture capitalist looking at the assets and debts of a company that may soon merge with another company. You want to know how much money the company owes, and how much interest it is paying on the amount that is owed.

This, and other information, determines the value of the company to potential investors.

The company has a debt of $55,300. The interest rate on this amount is 9.5 percent annually.

  1. After 1 full year, how much interest will accumulate on the total amount?
  2. If the company reduced the interest rate to 7 percent annually, how much interest would accumulate on the debt in 1 year at the new rate?

"We don't use advanced math such as calculus," says Michelle Ramsey, an investment advisor for venture capitalists. "But you use math to be able to figure out percentages, interest and mortgages. You need these skills."

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