Unit 5: Saving and Investing

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    06-Jan-2016

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Section 2 : Calculations. Unit 5: Saving and Investing. I CAN:. Define principle Apply the rate of return Calculate Simple interest, compound interest and the rule of 72. Principle. This is the amount of money YOU put in. - PowerPoint PPT Presentation

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<p>Unit 5: Saving and Investing</p> <p>Unit 5: Saving and InvestingSection 2: CalculationsI CAN: Define principleApply the rate of returnCalculate Simple interest, compound interest and the rule of 72PrincipleThis is the amount of money YOU put in.If I put $100 into a savings account at 1% interest, $100 is my PRINCIPLE1% is my APY or rate of returnAlways make APY a decimal. EX .01Instructor: See flipchartSimple InterestThis is the easiest type of interest to calculateMultiply Principle X Interest Rate X years invested$100 X .01 X 2 years= $2</p> <p>Instructor: See flipchart; When complete use 5.3 Simple interest worksheetCompound InterestCompound means you will earn interest on your previously earned interest. So, if you have $100 in a savings account earning 1% for 2 years and it compounds annually, you will:Year 1: 100 X .o1= $1100 + 1= 101Year 2: 101 X.01= 1.01101 + 1.01= 102.01After 2 years, you have earned $2.01 (simple interest would have earned only $2)Usually interest is compounded quarterly (4X per year), semi-annually (2X per year), or annually (1 X per year)Instructor: See flipchart; When complete use 5.4 compound interestThe Rule of 7272/%rate of return= how many years until your money doubles.DO NOT CHANGE % TO DECIMAL</p> <p>If I invest $100 at 1%, I will have $200 in 72 years72/1=72Instructor: See flipchart; When complete use 5.5 rule of 72CAN I?Define principleApply the rate of returnCalculate Simple interest, compound interest and the rule of 72</p> <p>I can prove this by completing: 5.3: simple interest5.4: compound interest5.5: Rule of 72</p>

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