Simple interest calculations
Calculate how much interest you will earn if $5000 is in the saving account for a year. The interest rate is 2% per year
Step 1: convert interest rate from % to decimal (divide % by 100)
2¸ 100 = 0.02 (interest rate)
Step 2: multiply amount by interest rate by your deposit to determine how much interest is earned after a year
5000 (saving) x 0.02 (interest rate) = $100 (interest you earn after putting the money in a saving account for one year)
Step 3: add the principal (the initial amount) with the interest earned to get the total
- add the initial saving and the earned interest together
5000 + 100 = $5100 (in the saving account after one year)
Example 2: $550, interest rate is at 1.5%
Step 1: convert interest rate from % to decimal (divide % by 100)
1.5 ¸ 100 = 0.015
Step 2: multiply amount by interest rate by your deposit to determine how much interest is earned after a year
550 x 0.015 = 8.25
Step 3: add earned interest with saving (principal)
550 + 8.25 = 558.25
Summary: Interest rate is very low, and we earn close to nothing from our saving accounts. Therefore, we need to find other ways to grow our money.
Activity 2: Calculate how much interest will be earned every year for the following cases
a. $1000 at 1% per year b. $1234 at 1% per year
1 ¸ 100 = 0.01 1 ¸ 100 = 0.01
1000 x 0.01 = 10 1234 x 0.01 = 12.34
1000 + 10 = 1010 1234 + 12.34 = 1246.34
c. $1000 at 5.5% per year d. $3210 at 5.75% per year
5.5 ¸ 100 = 0.055 5.75¸ 100 = 0.0575
1000 x 0.055 = 55 3210 x 0.0575 = 184.57
1000 + 55 = 1055 3210 + 184.57 = 3394.57
e. $1000 at 7.5% per year f. $1660 at 18.88% per year
7.5 ¸ 100 = 0.075 18.88¸ 100 = 0.1888
1000 x 0.075 = 75 1660 x 0.1888 = 313.41
1000 + 75 = 1075 1660 + 313.41 = 1973.41
g. $2500 at 18.88% for five years h. $3000 at 19.75% for four years
18.88 ¸ 100 = 0.1888
2500 x 0.1888 = 472 (interest for 5 years)
472 ¸ 5 =94.40 (interest earned in one year)
2500 + 94.40 = 2594.40 (in bank account after one year)
No comments:
Post a Comment