Vocabulary
A rental fee for letting the bank use your money.
Interest
Principal x Rate x Time =
Simple Interest
Convert 3% to a decimal
0.03
Use the compound interest table, find the amount of $1.00 for 5 pay periods at a 1.5% rate.
1.07728
Solve for interest: $2000 x 0.05 x .25
$25
The amount of money in your account.
Principal
Principal + Interest =
Amount
Convert 3/12 to a decimal
0.25
Use the compound interest table, find the amount of $1.00 for 10 pay periods at a 1.25% rate.
1.13227
Solve for amount: $2000 + $25 =
$2025
Annual Interest Rate
Amount - Original Principal =
Compound Interest
0.055
Use the compounded daily table to find the amount of $1.00 for 18 days.
1.00271
Solve for compound interest: $2025 - $2000 =
$25
When interest is calculated daily and added to your account.
Daily Compounding
Amount of deposit x Future value of $1.00 =
Future Value
Convert 6 months to a fraction then decimal
6/12 = 0.5
Use the compounded daily table to find the amount of $1.00 for 36 days.
1.00543
Solve for future value: $500 x 4.12161 =
$2060.81
When equal amounts of money are deposited into an account at equal periods of time.
Annuity
Future value of ordinary annuity x ($1.oo + rate/period) =
Future value of Annuity Due
Convert 2.25% to a decimal
0.0225
Use the future value table to find the amount of $1.oo for 7 pay periods at a 1.5% rate.
7.32299
Solve for future value: $2060.80 x 1.02 =
$2102.02