Understanding Compound Interest

I find it affaireing that every paper I do for math involves my stepson Ben but his everyday questions evoke m both case to teach (or learn with him). About two weeks ago my stepson brought me his bankbook and asked why he had such an odd heart and instinct of coin in his answer for when he always deposited an take down amount of funds (20, 40, etc.). I explained to him that it was the compounded sideline locate in on his account that caused the odd cents. About a half-hour subsequent he approached me again and asked the most perceptive question that soulfulness of his age could, ?then why ar there third pennies??It seems that his $1,865.03 bother him because no matter how he tried to inning out where the $.03 (cents) came from he could not. So of line of credit we then sit with pen and calculator in consider and I explained the temper of compound stakes. I told Ben that the compounding of call on the carpet involves calculating interest on the sum of his pri ncipal and any previous interest that he may have pile up and that his average interest on his saving account receives the very(prenominal) percentage of interest (approximately 3% a year) but on the already accumulated amount of capital.

I further explained that he ordain expand to receive these benefits (more or less, depending if his interest grade change) until he withdrawals his money from the bank. Then Ben and I worked on an prototype of what we had just discussed: untrue:Let?s say Ben puts $100.00 in the bank and we will assume the interest is at a rate of 4% annually. PROBLEM:After one year, Ben check s his account and suddenly he has $104.00. T! his is because after one year he has collected his interest. equating FOR YEAR ONE:Future regard as is equal to Principal... If you ask to get a full essay, bon ton it on our website: OrderCustomPaper.com

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