Is anyone a millionaire?

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Presentation transcript:

Is anyone a millionaire? Are you a millionaire yet? Is anyone a millionaire?

Starter: Investing your Money Four banks have accounts for ‘would be millionaires’ For a specific investment amount, they have interest rates that guarantee you will be a millionaire in just one year! C % increase over 1 year Bank Investment Interest Rate pa Natwest €995 020.00 0.25% Barclays €990 090.00 0.50% HSBC €985 200.00 0.75% Co-operative €980 300.00 1.00% New Savings Accounts Using Simple Interest, how much money would you have after 1 year? (final amount)

Eeekkk! Seems the banks got it wrong Z Eeekkk! Seems the banks got it wrong A review by the Senior 3 Maths Authority has highlighted an error with the ‘would be millionaire’ accounts – they don’t make you a millionaire The banks’ money men say it was a typo in the offer, they actually guarantee you will be a millionaire after 2 years Bank Investment Interest Rate pa Natwest €995 020.00 0.25% Barclays €990 090.00 0.50% HSBC €985 200.00 0.75% Co-operative €980 300.00 1.00% Work out your interest after 2 years.. Are you a millionaire yet?

Hmmm it’s still not working!! Z Hmmm it’s still not working!! The Senior 3 Maths Authority are angry, these accounts are still not making them actual millionaires! Bank Investment Interest Rate pa After 2 Years Natwest €995 020.00 0.25% €999 995.10 Barclays €990 090.00 0.50% €999 990.90 HSBC €985 200.00 0.75% €999 978.00 Co-operative €980 300.00 1.00% €999 906.00 Now the bank’s men are saying your calculations are wrong, its based on compound interest, not simple interest What can compound interest be and how it might be calculated?

Compound Interest Compound Interest Simple Interest Calculated at a fixed rate on principal amount + interest Principle amount changes every year Interest changes every year! Simple Interest Calculated at a fixed rate on the principal amount Remains the same every year!

Compound Interest Find the compound interest on €3000 invested for 2 years at 5% per annum. Total interest = €150 + €157.50 = €307.50 Principal Interest Year 1 €3000 5% of €3000 = €150 Year 2 €3000 + €150 = €3150 5% of €3150 = €157.50 New Principal

€14,000 is invested at 9. 25% per annum compound interest €14,000 is invested at 9.25% per annum compound interest. Find the total amount at the end of 3 years. Total Interest = 1295 + 1414.79 + 1545.66 = €4255.45 Final Principal = 16709.79 + 1545.66 = €18255.45 Principal Interest Year 1 €14000 9.25% of €14,000 = €1295 Year 2 €14000 + €1295 = €15295 9.25% of €15295 = €1414.79 Year 3 15295 + 1414.79 = €16709.79 9.25% of €16709.79 = €1545.66

Compound Interest – making you a millionaire! Now you can calculate the compound interest on your investment over two years! Hopefully you are now a millionaire! 