Name: ______________________________________

Simple Interest Formula: Compound Interest Formula: Inflation Formula: ( (

or ) )

Directions: Answer the following questions using the formulas above to help you. Round your answers to the nearest penny (two places after the decimal) and show your work. 1. What is the difference between simple and compound interest?

2. If you open a saving account at a bank, a. Would you want to have an account with simple interest or compound interest? Why?

b. Would the bank want to give you an account with simple or compound interest? Why?

3. You put $2000 in a savings account with simple interest. The bank gives you an interest rate of 3%. If you leave the money in the account for 5 years, how much interest will you receive?

4. You put $100 in a savings account with simple interest. The bank gives you an interest rate of 6%. How much money will you have in the account after 10 years?

5. You owe $12000 on a credit card. That balance stays on the card for 6 years and the interest is compounded monthly at 23%. How much will your credit card balance be after the six year period?

6. How much interest will you accrue if you have $212 in an account for 12 years at 2%. The interest is compounded quarterly?

7. In 1950 an 8oz sirloin steak cost $6.16. If the price inflated 1%, what would the price have been in 1997.

8. In 1970 a stamp cost $ 0.06. If the price inflates by 4%, what will be the price in 2025?