MATH: Compound Interest in Savings Accounts

Last updated 12 months ago

Note from the author:

Compound interest is the key to how your money can make money.  Understanding the formula for compound interest and how each variable contributes to growth will help you prioritize how you want to plan for the future. 

Show your work and use complete sentences for full credit.

Instructions

Compound interest is the key to how your money can make money.  Understanding the formula for compound interest and how each variable contributes to growth will help you prioritize how you want to plan for the future. 

Show your work and use complete sentences for full credit.

How banks make money.

Part I: Example

Part II: Practice Problems
Complete the following practice problems and show your work in the space provided. Be sure to show your work for full credit. Remember the formula for calculating compound interest:

A= Total Savings (this is what we are solving for)
P= Intial Investment (what did you start with)
r= Interest Rate (make sure you convert it to decimal form)
n= How many times a year you get an interest payment
t= How many years your money stays in the account

Required

Cooper is opening an online savings account to hold the $20,000 he made from selling his car.  The online account pays 1.5% interest compounded monthly. Cooper decides to get an e-bike, so he can use this money to start saving for a house down payment. If Cooper does not deposit or withdraw any money from the account, how much will be in the account in 5 years?

What are the necessary values to answer this question?
P=_______ 
r=_______ 
n=_______ 
t=_______ 

Required

Cooper is opening an online savings account to hold the $20,000 he made from selling his car. The online account pays 1.5% interest compounded monthly. Cooper decides to get an e-bike, so he can use this money to start saving for a house down payment. If Cooper does not deposit or withdraw any money from the account, how much will be in the account in 5 years?

Required

If Cooper decides not to use this money for a down payment and leaves it in the account for 25 years, how much will be in the account then?

Required

Do you think Cooper should leave the money in the Savings account for 25 years?

Required

Lili has saved $2,500 money from her part-time job at a bakery. Since she will not need this money for a few years, she decides to put the money in a 3-year CD (Certificate of Deposit) at a local credit union. The credit union offers Lili 2.75% APR, compounded quarterly. How much will Lili’s CD be worth at the end of the 3 years?

Required

Gail has $5,500 that she wants to put in a new savings account. She is considering two banks that are very similar. One difference she notices are the interest rates:
Neighborhood Bank - 1.2% interest, compounded annually
Beautiful Day Bank - 1.2% interest, compounded daily
Based on interest, which bank would you suggest Gail pick if she plans to have her money in the account for 15 years?

Part III: Reflection

Required

Refer back to Question #9. If Lili had invested her money in a CD (Special High-Interest Savings Account) in the 1980’s (when CDs had the highest rates in modern history) she could have received an interest rate of 11%. How much more money would Lili have earned in the 1980’s compared to now?

Required

You have used the formula:
to calculate compound interest. Without a change in the interest rate, how could you increase the amount of money you earn while your money is in a savings account?

Here is a list of the best high-yield CDs available as of September 2022. Use this chart to answer the following questions.

Required

If you only had 200 dollars to start a CD account. Which bank would you choose and why? UCS

Required

Assume you have $500 and you have a savings goal of 3 years. What is the most money you could make in profit if you used a bank on this list?

Required

MATH: Compound Interest in Savings Accounts

Compound interest is the key to how your money can make money. Understanding the formula for compound interest and how each variable contributes to growth will help you prioritize how you want to plan for the future.

Show your work and use complete sentences for full credit.

Compound interest is the key to how your money can make money. Understanding the formula for compound interest and how each variable contributes to growth will help you prioritize how you want to plan for the future.

Show your work and use complete sentences for full credit.

How banks make money.

How Compound Interest works in Savings Accounts

If your account compounds on a daily basis, which variable would you plug into the formula?

How do you convert a percent to a decimal?

When evaluating inside the parenthesis, which operation should you carry out first?

Which of the following options would INCREASE the total amount?

Part I: Example

Part II: Practice Problems

If Cooper decides not to use this money for a down payment and leaves it in the account for 25 years, how much will be in the account then?

Do you think Cooper should leave the money in the Savings account for 25 years?

Part III: Reflection

Refer back to Question #9. If Lili had invested her money in a CD (Special High-Interest Savings Account) in the 1980’s (when CDs had the highest rates in modern history) she could have received an interest rate of 11%. How much more money would Lili have earned in the 1980’s compared to now?

You have used the formula:
to calculate compound interest. Without a change in the interest rate, how could you increase the amount of money you earn while your money is in a savings account?

Here is a list of the best high-yield CDs available as of September 2022. Use this chart to answer the following questions.

If you only had 200 dollars to start a CD account. Which bank would you choose and why? UCS

Assume you have $500 and you have a savings goal of 3 years. What is the most money you could make in profit if you used a bank on this list?

Assume you have $500 and you have a savings goal of 5 years. What is the most money you could make in profits if you used a bank on this list?

MATH: Compound Interest in Savings Accounts

Compound interest is the key to how your money can make money. Understanding the formula for compound interest and how each variable contributes to growth will help you prioritize how you want to plan for the future.

Show your work and use complete sentences for full credit.

Compound interest is the key to how your money can make money. Understanding the formula for compound interest and how each variable contributes to growth will help you prioritize how you want to plan for the future.

Show your work and use complete sentences for full credit.

How banks make money.

How Compound Interest works in Savings Accounts

If your account compounds on a daily basis, which variable would you plug into the formula?

How do you convert a percent to a decimal?

When evaluating inside the parenthesis, which operation should you carry out first?

Which of the following options would INCREASE the total amount?

Part I: Example

Part II: Practice Problems

If Cooper decides not to use this money for a down payment and leaves it in the account for 25 years, how much will be in the account then?

Do you think Cooper should leave the money in the Savings account for 25 years?

Part III: Reflection

Refer back to Question #9. If Lili had invested her money in a CD (Special High-Interest Savings Account) in the 1980’s (when CDs had the highest rates in modern history) she could have received an interest rate of 11%. How much more money would Lili have earned in the 1980’s compared to now?

You have used the formula:to calculate compound interest. Without a change in the interest rate, how could you increase the amount of money you earn while your money is in a savings account?

Here is a list of the best high-yield CDs available as of September 2022. Use this chart to answer the following questions.

If you only had 200 dollars to start a CD account. Which bank would you choose and why? UCS

Assume you have $500 and you have a savings goal of 3 years. What is the most money you could make in profit if you used a bank on this list?

Assume you have $500 and you have a savings goal of 5 years. What is the most money you could make in profits if you used a bank on this list?

You have used the formula:
to calculate compound interest. Without a change in the interest rate, how could you increase the amount of money you earn while your money is in a savings account?