Simple Vs. Compound Interest - Ms. Hale's Website

Simple Vs. Compound Interest

Name ____________________________Per___

Fill in the following spreadsheets showing exactly what you type into the calculator, along with each answer. (This will help you next class!!!)

1.) You put $5,000 into an account that earns SIMPLE interest at 11% APR. Show the growth of your money over the first 4 years.

Year

1 2 3 4

Principal

Total Amount YOU Deposited:

Interest

Total Amount of Interest Earned =

Account Balance

2.) Show the growth of your $5,000 over the first 4 years in an account that earns 11% APR, COMPOUNDED annually.

Year

1 2 3 4

Principal

Total Amount YOU Deposited:

Interest

Total Amount of Interest Earned =

Account Balance

How much more interest did you earn when the interest was compounded? _____________

3.) What if you deposit $5,000 the first year & an additional $1,000 every year after that? Show the growth of your account over the first 4 years in an account that still earns 11% APR, COMPOUNDED annually.

Year

1 2 3 4

Principal

Total Amount YOU Deposited:

Interest

Total Amount of Interest Earned =

Account Balance

How much more interest did you earn by depositing more into this compound interest account? _____________

4.) What if you only deposit the first $5,000 again, but the bank compounds the interest SEMIANNUALLY instead? Show the growth of your account over the first 4 years in an account that still earns 11% APR, but is now COMPOUNDED semiannually.

Year

0.5 1 1.5 2 2.5 3 3.5 4

Principal

Total Amount YOU Deposited:

Interest

Total Amount of Interest Earned =

Account Balance

How much more interest did you earn in table 4 than in table 2? _____________

5.) What if you deposit $5,000 the first year & an additional $1,000 every year after that, AND the bank compounds the interest SEMIANNUALLY? Show the growth of your account over the first 4 years in an account that still earns 11% APR, COMPOUNDED semiannually.

Year

Principal

0.5

Interest

Account Balance

1

1.5

2

2.5

3

3.5

4

Total Amount YOU Deposited:

Total Amount of Interest Earned =

Critical Thinking Assignment

Name_______________________

Which is better then, depositing more money or waiting for more compounding periods?

Table Total Amount YOU Deposited

1

2

3

4

5

Total Amount of Interest Earned

Ratio of

... as a

Interest Earned to Amount Deposited Percent

Think about all of the numbers you have calculated during this activity AND with your own personal opinion about what it will take to become wealthy.

Which do you think is MORE important when it comes to making your money grow ? the amount of money you put into the account OR how many times it is compounded? Explain your thinking (be prepared to defend it).

__________________________________________________________________________________________________

__________________________________________________________________________________________________

__________________________________________________________________________________________________

Critical Thinking Assignment

Name_______________________

Which is better then, depositing more money or waiting for more compounding periods?

Table Total Amount YOU Deposited

1

2

3

4

5

Total Amount of Interest Earned

Ratio of

... as a

Interest Earned to Amount Deposited Percent

Think about all of the numbers you have calculated during this activity AND with your own personal opinion about what it will take to become wealthy.

Which do you think is MORE important when it comes to making your money grow ? the amount of money you put into the account OR how many times it is compounded? Explain your thinking (be prepared to defend it).

__________________________________________________________________________________________________

__________________________________________________________________________________________________

__________________________________________________________________________________________________

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