# How Savings Grows Activity

Topics: Quarters Pages: 2 (208 words) Published: December 5, 2014
4.03

Name: Cheyanne Elie     Class:  POB  Date: 12/3/14
How Savings Grow Activity
Directions:  Calculate the balance and interest.

Section A: Calculate simple interest.
Use the simple interest rate formula: P=Principal, R=Rate, T=Time and I=Interest  Rate
P * R * T= I.
Example: \$500*.03*1=\$15

Principal
Rate
Time
Amount of
Ending
Interest
Balance
\$500
3%
1 year
\$15
\$515
\$500

8%

1 year

\$41

\$540

\$500

8%

2 years

\$80

\$581

\$500

8%

3 years

\$120

\$620

\$4,500

8%

3 years

\$1,080

\$5,580

\$4,500

10%

3 years

\$1,350

\$5,850

Section B: Calculate interest compounded annually.
Computed on amount saved plus interest previously earned
Year
Beginning Balance
8% Interest

\$500

\$40

\$540

\$540

\$43.2

\$583.1

\$582.20

\$46.7

\$629.66

\$ 629.86

\$50.39

\$680.26

\$680.25

\$54.42

\$734.8

Total Amount of Interest

Ending Balance

\$234.71

4.03

How Savings Grow Activity Continued

Section C: Calculate interest compounded quarterly at 8% annual interest  rate.
1. Multiply the principal (beginning balance) by ¼ of the interest rate to  determine the amount of interest paid for the first quarter.  2.  Multiply the (principal + first quarter interest) by ¼ of the interest rate to  determine the amount of interest paid for the second quarter. Interest paid for  remaining quarters is based on principal and interest paid the previous  quarters.

2. Add the four quarters of interest together to determine the total interest for  year.
3.  Add beginning balance and total interest for the year to determine ending  balance.
4. The ending balance becomes the beginning balance for the next year.

Year  Beginnin
First  Second  Third
Fourth
Total
Ending
g Balance  Quarter  Quarter  Quarter  Quarter  Interest ...