Terms to Know
The Principal
What is the Amount of money earning interest?
Compound Interest
What is Compound Interest = Amount - Original Principal
Suppose you deposited $8,000 in an account that pays 5.5% interest compounded daily. How much interest will you earn in 31 days?
What is $37.44?
You deposit $500 in an ordinary annuity at the end of each quarter. The account earns 6% interest compounded quarterly. What is the future value of the account in 2 years? How much interest has it earned?
What is
FV: $4,216.42
Interest: $216.42
Compound Interest
What is Interest not only the original principal but also on the interest earned during the previous interest period?
Daily Compound
What is
Amount = Original Principal X Amount of $1.00
Compounded interest = Amount - Original Principal
State Bank pays 6% interest compounded quarterly on regular savings accounts. You deposited $3,000 for 2 years. You made no other deposits or withdrawals. How much interest did you earn for 2 years? (HINT: A11)
What is $379.47?
You deposit $923 in an ordinary annuity at the end of each quarter. The account earns 6% interest compounded quarterly. What is the future value of the account in 2 years? How much interest has it earned?
What is
FV: $7,783.51
Interest: $3,783.51
Annual interest rate
What is the percentage of the principal?
Total Deposit
What is
(Currency + Coins + Checks) - Cash Received
You deposit $9,000 in an account that pays an annual 5.5% interest rate. Determine the simple interest and the amount in the account for the following:
4 years 5 months 9 days
What is
4 year: $1,980
5 months: $206.25
9 days: $12.21
Suppose you had made $500 deposits in an annuity due at the beginning of each quarter in an account earning 6% interest compounded quarterly. What is the future value of the account in 2 years? How much interest will it have earned?
What is
FV: $4,279.67
Interest: $279.67
Annuity
What is an account into which someone deposits an equal amount of money at equal periods or equal intervals of time?
total interest rate per period
What is Annual Rate / Number of periods per year?
You deposited $10,000 (present value) into a savings account paying 6% annual interest compounded monthly. What amount (future value) will he have in his account after 5 years? How much compound interest will he have earned?
What is $3,488.50
You deposited $500 in an ordinary annuity at the end of each month at an account earning 6% interest compounded monthly. What is the future value of the annuity in 15 years? How much interest will Diane have earned in the 15 years?
What is
FV: $145,409.36
Interest: $55,409.36
Simple Interest
What is Interest = Principal X Rate X Time
Total number of Interest Periods
What is Periods per Year X Number of Years?
On May 31, You deposited $1,000 in a saving account that pays 5.5% interest compounded daily. On July 1, how much interest had the principal in your account earned?
What is $4.68?
You deposited $500 in an ordinary annuity at the end of each month at an account earning 6% interest compounded monthly. What is the future value of the annuity in 25 years?
What is
FV: $346,496.99