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8th
WONDER OF THE WORLD: COMPOUND INTEREST
Interest makes your money grow!
Tell
us what you know about the 8th wonder of the world and what
it does.
The
8th wonder of the world is "compound interest."
It makes your money grow little by little. You decide to put
your money in the bank (you lend them the money) and they
pay you "rent" (interest) for using your money. The rent varies
in different banks, so you need to find out where they will
pay you more "rent" (interest). You make interest on your
original money and on the interest too by keeping your money
in your account.
Example:
Which of these two banks would you choose to put your money
in? You probably would choose bank #2, because you get more
"interest" (rent on your money).
LESSON:
"Get paid more interest" Learn to look for better interest
rates from the banks before you lend them your money! Go to
two banks and ask what interest they pay on their "Money Market
Account."
Bank
1 _________________ pays_____ % interest
Bank
2 _________________ pays_____ % interest
What
do you notice in the next example with the 8th wonder of the
world?
Bank
1 Bank 2 You lend them $1000 You lend them $1000 "Rent" (interest)
rate is 5% "Rent" rate is 10% They pay you $50 They pay you
$100 Interest (compounded annually) Year Amount Percent Interest
You Receive One $1000.00 10% $100.00 Two $1100.00 10% $110.00
= more interest Three $1210.00 10% $121.00 Four $1331.00 10%
$133.10 Five $1464.10 10% $146.41 Six $1610.51 10% $161.05
Seven $1771.56 10% $177.15 Eight $1948.71 10% $194.87 Nine
$2143.58 your money doubles.
CLICK
HERE TO ASK TRIANA AND KOSTAS A QUESTION ABOUT COMPOUND INTEREST.
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