Choose the best answer; fill in circle completely

In order to help a daughter who is about to take one of those standardized multiple choice tests that sort out the wheat from the chaff in our society, I have been generating multiple choice math problems. These things fall into a familiar pattern. They are all unrealistic, but not completely incomprehensible.

George was twice the age of Sarah in 1984 but 1/2 the age of Ben in 1992 …

Children destined for the elite classes are taught not to wonder why certain questions are asked. But at least they can understand what is being asked.

There is one traditional category that defies that principle, however: compound interest. No one under the age of, what?, 40 understands what that is. At least from personal experience. You might know it if you studied history. In fact, like French, it might be very useful if you studied history. But neither French nor hisotry finds much favor with our ruling class, so it’s a wonder why such things are still around. Any way, compound interest is neither known by experience any more or likely to be useful to anyone.

Because: no one gets compound interest anymore. I guess, you have to add: with the exception of loan sharks, venture capitalists, rentiers in some arcane, possibly European aristocratic, class. Banks would charge it, if they actually lent money. But they don’t. Children can’t even comprehend the concept of interest on money. The federal government gives money to banks at 0% interest, purportedly to encourage lending. The banks use it to buy each other and pay bonuses. If children somehow got money into passbook savings accounts, they would find that they get about 0.5% simple interest on their money. Or using rounding (something else taught on the SAT), 0. So the use of compound interest problems makes the SAT look like the days when they used analogies, like:

birth : Ivy League :: sport : regatta.

So what could organizations like the College Boards use that would be understandable to the general mass of the children who want a crack at being the soulless bastards that toy with the rest of our lives? His my suggest for one question:

Assume you are the agent for an investment bank that holds securitized debt obligations of a variety of defaulting home owners whose mortgage is at 9%. Your principals receive federal loans at 0%. How much would they make if they foreclosed on all the homeowners and used the money to invest in European sovereign debt? Assume that any losses on that debt will be made up by US taxpayers (including those who the banks foreclosed on).

  1. No trackbacks yet.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s