Interest and Savings Practice Worksheet

Directions:
1. Use the PPT Simple and Compound Interest to answer the questions if unable to on your
own.
2. Answer the questions and bold or underline the answers.
3. Hand in online!
A. Define the following:
1) Principal - the amount of money you borrow
2) Interest - a fee that you pay the lender in exchange for borrowing the money
3) Interest rate - is the rate at which interest is paid by for the use of money that you
borrow (percentage)
4) Simple interest - A quick method of calculating the interest charge on a loan.
5) Compound interest - is the interest you earn on interest!
6) Rule of 72 is a great way to estimate how your investment will grow over time.
Use the two examples below to answer questions B and C.
Simple Interest Example
Year

Principal Amount Saved

Interest Earned (10% Annual Interest Rate)

Ending Balance

$100.00

$10.00

$110.00

$100.00

$10.00

$120.00

$100.00

$10.00

$130.00

Total Interest Earned

$30.00

Compound Interest Example

Year

Principal Amount Saved

Interest Earned (10% Annual Interest Rate)

Ending Balance

$100.00

$10.00

$110.00

$110.00

$11.00

$121.00

$121.00

$12.10

$133.10

Total Interest Earned

$33.10

B. What are the benefits of compound interest? You earn money on interest.
C. What are the benefits of simple interest? Its Simple!
Use the last few slides of the Simple and Compound Interest PPT to assist you with this
question:
D. Calculate simple and compound interest for the following examples: Assume interest is
calculated yearly (1 time a year)
1) $500 at 4% for 5 years
Simple Interest earned: __$200___
Compound Interest earned: _______

2) $750 at 6.5% for 10 years

Simple Interest earned: __$487.50__
Compound Interest earned: __$975__
3) $2,000 at 7.56% for 20 years
Simple Interest earned: _____$1,512____
Compound Interest earned: __$2,450___
E. Identify reasons why savers would want to invest for different periods of time. You get
different amounts of interests.
F. What does the concept of Rule of 72 mean? How long would it take to double $100 if it
earned 10% interest. Now apply this rule to the examples in #4 above.
It means that you multiple the amount of time and 72. You will then see the amount of
interest you will get with the interest. It would 7.2 years to get $100 interest.