Financial Report Worksheet

Directions: Complete the financial report worksheet to help you with your calculations to create
the APA report.

1. Go to your financial institutions website or a local financial institution website and find the
interest rate and compounding frequency (monthly, quarterly, annually, etc) for a savings
account. Record that here:

Liberty Bank Savings account

Interest rate: 0.05 % - for $.01 - $9,999.99
Compounding frequency: Daily .05%

r nt
2. Use the compound interest formula: A=P 1+ ( )
n
where r is the rate as a decimal, n is the
number of times it is compounded in the time frame, t is the amount of time and P is the starting
value. Calculate your balance if you invest $1,000 for 1 year.

Principal Amount: $1,000

Time Period in Years: 1 Years

Interest From Period: A = P×(1 + r/n)nt

where A = final amount including interest, P = principal amount, r = annual interest rate (as

decimal), n = number of compounds per year, t = number of years

A = $1,000 × (1 + [0.0005/1]) to power (1 × 1) then rounded to 2 decimal places = $0.50

Total After Period: Principal Amount ($1,000) + Interest in Period ($0.50) = $1,000.50

3. Using the compound interest formula Calculate your balance if you invest $1,000 for 5 years.

Principal Amount: $1,000

Time Period in Years: 5 Years

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Interest From Period: A = P×(1 + r/n)nt

where A = final amount including interest, P = principal amount, r = annual interest rate (as

decimal), n = number of compounds per year, t = number of years

A = $1,000 × (1 + [0.0005/1]) to power (1 × 5) then rounded to 2 decimal places = $2.50

Total After Period: Principal Amount ($1,000) + Interest in Period ($2.50) = $1,002.50

4. Now select a new compounding period (monthly, quarterly, annually, etc) and redo your

calculations from number 2 & 3.

For 1 Year Compounding Monthly

Principal Amount: $1,000

Time Period in Years: 1 Years

Interest From Period: A = P×(1 + r/n)nt

where A = final amount including interest, P = principal amount, r = annual interest rate (as

decimal), n = number of compounds per year, t = number of years

A = $1,000 × (1 + [0.0005/1]) to power (1 × 1) then rounded to 2 decimal places = $0.50

Total After Period: Principal Amount ($1,000) + Interest in Period ($0.50) = $1,000.50

For 5 Years Compounding Weekly

Principal Amount: $1,000

Time Period in Years: 5 Years

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Interest From Period: A = P×(1 + r/n)nt

where A = final amount including interest, P = principal amount, r = annual interest rate (as

decimal), n = number of compounds per year, t = number of years

A = $1,000 × (1 + [0.0005/1]) to power (1 × 5) then rounded to 2 decimal places = $2.50

Total After Period: Principal Amount ($1,000) + Interest in Period ($2.50) = $1,002.50

5. Now select a new interest rate from another financial institution that is different than your
starting one. Redo your calculations from number 2 & 3 with the new rate but keeping the same
frequency it is compounded.

Wells Fargo Way 2 Save Savings

Interest Rate: .01%
$1,000 for 1 year

Principal Amount: $1,000

Time Period in Years: 1 Years

Interest From Period: A = P×(1 + r/n)nt

where A = final amount including interest, P = principal amount, r = annual interest rate (as

decimal), n = number of compounds per year, t = number of years

A = $1,000 × (1 + [0.0001/1]) to power (1 × 1) then rounded to 2 decimal places = $0.10

Total After Period: Principal Amount ($1,000) + Interest in Period ($0.10) = $1,000.10

Interest Rate .01%

$1,000 for 5 Years

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Principal Amount: $1,000

Time Period in Years: 5 Years

Interest From Period: A = P×(1 + r/n)nt

where A = final amount including interest, P = principal amount, r = annual interest rate (as

decimal), n = number of compounds per year, t = number of years

A = $1,000 × (1 + [0.0001/1]) to power (1 × 5) then rounded to 2 decimal places = $0.50

Total After Period: Principal Amount ($1,000) + Interest in Period ($0.50) = $1,000.50

6. What did you learn about comparing the compounding frequency that interest is compounded?

I learned that there are several factors to consider when investing money into these types of

compounding savings accounts, including how much money you can earn depends greatly on

your interest rate that is offered on the account, how much money you are choosing to invest into

your account as well as how long you leave your funds untouched in the account. In order to

accrue the most money based on interest, you need to select a bank that offers a competitive

interest rate and a bank that offers competitive interest rates whether compounded daily, monthly

or yearly. Many banks will offer daily compounding rates for example, but with a lower interest

rate, thus making less overall. It is important to take both interests rates as well as frequency of

compounding into consideration.

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7. What did you learn about comparing the interest rate?

I learned that the interest rate a bank offers to its clients has an enormous impact on the amount

of money one can accrue when depositing funds and leaving those funds untouched over the

course of many years. The better the interest rate, or higher, the more money you can make on

funds.

8. Is it better to have a slightly higher rate or have interest compounded more often?

It is better to compound more often. Money grows more quickly when it has the opportunity to

earn more on compounded interest made frequently. The frequency of compounding makes a

difference in terms of your overall return at the end. It is also important to make additional

contributions to your saving account so that you can make the most from this type of

compounding interest.

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Saving Money, the Smart Way

Saving money should always be something researched and taken very seriously because how you

choose to invest your money is critical. That being said, saving accounts are the most important

way to save money, make some money back from interest, but also have the flexibly to access

your funds if need be. Saving money should always be a priority before investing it. It is

ultimately a person’s savings that provides them with the capital to live and feed future

investments. Although using a simple savings account will certainly not make you rich, it can

provide you a safe way to bank money and also make money given the right interest rate and

frequent compounding.

A savings account is a good way to earn some interest on your funds, however depending on

how much you choose to contribute, the amount you will accrue will be minimal. Whether the

savings account is compounding daily, monthly or annually is also a large part in exactly how

much you will end up making on your money. The best way to ensure you are making the most

money is to choose a financial institution that has a higher interest rate combined with a higher

frequency of compounding. The more frequently your funds and interest is compounded, the

more financial gains you will accrue.

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Many individuals immediately assume going with a higher interest rate annually is always the

best option. What they do not understand is that although the interest rate may be slightly lower

when more frequent compounding occurs, in the end you can make more money on your funds,

especially if you choose to continually contribute more to your savings account.

The best advice I have taken away from my research would be to choose your financial

institution wisely! Many different banks offer a variety of saving account types, some of which

will offer more than others. For example, I found that Liberty Bank offered much higher interest

rates then Wells Fargo, by simply visiting their sites. Next, I would apply the formula to

calculate how much more I could potentially make if I chose more frequent compounding with a

lower interest rate. I would also set a plan to make continuous contributions to my savings

account, to make the most of my funds as they are not touched. I would recommend that

individuals not be discouraged when they see a lower interest rate with more frequent

compounding as it can actually make you more money in the long run! You must plan for your

future and take everything into account before making any type of financial investment.

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