385 words - 2 pages

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?

At the end of four years if you compounded the interest annually you would have $ 5,519.06. If you compounded the interest semiannually you would have $ 5,522.43

2. Change the interest rate to a higher rate. How much will you have at the end of four years if ...view middle of the document...

54. If you chose to use the same interest rate and compound the interest semiannually you would have $ 5,632.46.

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?

If you used a lower rate of 2% and compounded annually you would have $ 5,412.16. If you compounded the interest semiannually with the same rate you would have $ 5,414.28.

4. You have $10,000 in credit card debt, at a 14% interest rate. When is it beneficial to pay off the debt vs. putting money in a savings account? Explain the pros and cons of either option.

A benefit of paying off the debt is that you will not have to keep paying finance charges. For example a $ 10,000 debt with a 14% interest rate will cost you $ 6,889.60 in interest over the course of a four year term. One benefit to paying these charges if you pay them on time it will help your credit score stay higher. One benefit to putting your money in a savings account is that it is safer there in the account. I would have to say that one of the cons of a savings account is that your money does not build a lot of interest over time.

Beat writer's block and start your paper with the best examples