Essay about Compound Interest and Savings Account

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Dalia Cruz FP/120

Find a Time Value of Money calculator on the Internet and calculate your own personal figures, changing the interest rate and the compounding of the interest rate (annually, semiannually, and quarterly) as delineated below:

1. You place $5,000 in a savings account earning 2.50% interest compounded annually. How much will you have at the end of four years? How much would you have at the end of four years if interest is compounded semiannually? If the interest compound annually at 2.50% I would have about $500 accumulated. That extra 500 dollars would accumulate if the 5,000 dollars remain without any personal deduction transactions from the personal account.

2. Change the interest rate to a higher rate. How much will you have at the end of four years if interest is compounded annually at a rate of 3%? How much would you have at the end of four years if interest is compounded semiannually? if the annually rate is 3% in the account holding 5,000 I would gain 600 dollars at the end of four years.

3. Now change the interest rate to a lower rate. How much will you have at the end of four years if interest is compounded annually at a rate of 2%? How much would you have at the end of four years if interest is compounded semiannually? At the end of four years on a 2% rate holding 5,000 in the bank I would accumulate 400 dollars in total.

4. You have $10,000 in credit card debt, at a 14% interest rate. When is it beneficial to pay off the

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