Understanding Compound Interest

Be sure to show your work.

1. Using the simple interest method calculate total interest income for two years, given the following information: (2 points)

   1. Principal amount = $12,500.00

   2. Annual Interest rate = 10%

   3. After two years: Total interest income = [ ]

2. Using the simple interest method calculate total interest income for three years, given the following information: (2 points)

1. Principal amount = $30,000.00

2. Annual Interest rate = 12%

3. After three years: Total interest income = [ ]

3. Calculate the compound interest income using the following information (use the long-hand method and show your work to assist you a table has been provided): (8 points)

1. Principal = $10,000.00

2. Annual Interest Rate = 12%

3. Compounding Frequency monthly

4. Total amount of money you will have at the end of the year = [ ]

Compound Interest Table:

Month	Beginning Balance	Interest Earned	Ending Balance
1	$10,000.00
2
3
4
5
6
7
8
9
10
11
12

4. Calculate the compound interest income using the following information (using any method: long-hand, formula, or electronic calculator): (8 points)

5. Principal = $20,000.00

6. Annual Interest Rate = 12%

7. Compounding Frequency monthly

8. After two years: Total amount of money you will have = [ ]

9. After two years: Total Interest Income = [ ]