Challenging… Interest Rates and Savings By: Nicole Sandal

Introduction… Savings accounts will earn interest on the amount of money deposited into the account.  Calculating the interest on a savings account will show the small business how much money it will earn on the deposit.  As an example, Sally deposits $1000 into her savings account at the local US Bank. Sally’s account earns 5 percent interest per year. Sally keeps the amount in the bank for six months. The formula to calculate simple interest in a savings account is the deposit amount times the annual interest rate times the amount of time the money is deposited.

First…  Determine the terms of the interest calculations…  $1000 deposited into the savings account  5% interest rates  Keeps $1000 in the account for six months

Convert…  Convert the time (six months) into a fraction. So, out of the 12 months of the year, six is half so the fraction is: 6/12= ½= 50%= (Convert to a decimal) =.5  Make sure the interest rate is also in the decimal form 5%= 0.05

Then…  Plug everything into the simple interest formula!!! Simple interest= Principal x interest rate x time Simple interest= (1000)(0.05)(.5) SIMPLE INTEREST= $25