Section 2: Calculations
UNIT 5: SAVING AND
INVESTING
I CAN:
 Define principle
 Apply the rate of return
 Calculate Simple interest, compound interest
and the rule of 72
Principle
 This is the amount of money YOU put in.
 If I put $100 into a savings account at 1% interest,
$100 is my PRINCIPLE
 1% is my APY or rate of return
 Always make APY a decimal. EX .01
Instructor: See flipchart
Simple Interest
 This is the easiest type of interest to calculate
 Multiply Principle X Interest Rate X years invested
 $100 X .01 X 2 years= $2
Instructor: See flipchart; When complete use
5.3 Simple interest worksheet
Compound Interest
 Compound means you will earn interest on your
previously earned interest. So, if you have $100 in a
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savings account earning 1% for 2 years and it compounds
annually, you will:
Year 1: 100 X .o1= $1
100 + 1= 101
Year 2: 101 X.01= 1.01
101 + 1.01= 102.01
After 2 years, you have earned $2.01 (simple interest
would have earned only $2)
Usually interest is compounded quarterly (4X per year),
semi-annually (2X per year), or annually (1 X per year)
Instructor: See flipchart; When complete use 5.4 compound interest
The Rule of 72
72/%rate of return= how many years until your
money doubles.
DO NOT CHANGE % TO DECIMAL
If I invest $100 at 1%, I will have $200 in 72 years
72/1=72
Instructor: See flipchart; When complete use 5.5 rule of 72
CAN I?
 Define principle
 Apply the rate of return
 Calculate Simple interest, compound interest
and the rule of 72
 I can prove this by completing:
 5.3: simple interest
 5.4: compound interest
 5.5: Rule of 72