Essential Question:
How do I calculate simple and compound interest?
LEARNING TARGET:
- I can calculate simple interest using the simple interest formula.
SUCCESS: I can use the simple interest formula to calcucate interest on checkings, savings and CD bank accounts.
VOCABULARY |
NOTES
Checking Accounts give individuals the easiest access to their funds via checks, but pay little or no interest. Indicate that most banks require students of middle school age to have a parent as a cosigner when opening a checking account. Individuals also have access to their funds via their debit cards.
Savings Accounts provide some interest but require the individual to visit a bank branch, use a debit card at an ATM, or go online to have access to his or her funds. Certificates of Deposit (CDs) have the advantage of offering higher interest rates than savings accounts, but have tighter restrictions on access to funds. Individuals purchasing a CD must commit to holding it for a period of time, generally ranging from six months to five years or more. Selecting the term of a CD involves some risk. When a long-term CD is purchased and interest rates later go up, the purchaser only receives the interest rate stated at the time of purchase. If it turns out that interest rates go down, the purchaser will be happy to have locked in a favorable rate. What is the link between banking and interest?
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2/7/18 ACTIVITY 1:
2/8/18
ACTIVITY 2: In this activity you will need to create each table shown and solve each in Microsoft Excel.
Building Block 1 (Basic formula)
Amy Ni wants to borrow, $450.00 at 6% for 2 years. Find the interest in dollars that Amy will have to repay and the total amount, principal plus interest Amy will repay.
Amy will use the formula: I = (P)(R)(T) to find the interest in dollars she will repay.
Amy knows that 6% = 6/100 or .06. Thus, I = P R T equals (450)(.06)(2) or $54.00.
Amy will pay back $504.00 when the loan is due. (Note that 2 years was not expressed as 24 months!) To multiply by 24 would have been saying that Amy had the loan for 24 years.
Calculate the amount of interest and the amount to repay by recreating the table below In Microsoft Excel.
Amy Ni wants to borrow, $450.00 at 6% for 2 years. Find the interest in dollars that Amy will have to repay and the total amount, principal plus interest Amy will repay.
Amy will use the formula: I = (P)(R)(T) to find the interest in dollars she will repay.
Amy knows that 6% = 6/100 or .06. Thus, I = P R T equals (450)(.06)(2) or $54.00.
Amy will pay back $504.00 when the loan is due. (Note that 2 years was not expressed as 24 months!) To multiply by 24 would have been saying that Amy had the loan for 24 years.
Calculate the amount of interest and the amount to repay by recreating the table below In Microsoft Excel.
Building Block 2 (When Time is less than a year)
When the time of the loan is less than a year, Time has to be expressed as parts of a year.
Taylor Price needs to borrow $300 for 6 months.
If the interest rate is 6% how much will Taylor pay in interest? How much will Taylor repay?
Taylor will use the formula: I = (P)(R)(T) to find the interest she will pay. But first, she will convert six (6) months as a fraction of a year.
There are 12 months in a year, so Taylor will have the loan for 6/12 or ½, or .5 of the year. Thus, Taylor will multiply $300 * .5 * .06 to find that she will owe $9.