Financial Report
Financial Statement
Financial Report
Money is a central concept for everyone no matter what age you are. In this project, you will explore exponents using the compound interest formula to make conclusions on investments.
In this project, you will:
Use exponents to calculate the amount of interest earned on an investment.
Evaluate formulas with exponents.
Convert interest rates to decimals.
Apply the order of operations.
To complete this project you will:
Complete the Financial Report Worksheet to guide you in developing your budget. Be sure to show all work!
Complete a 2-page, double-spaced, APA-formatted report. In the report, you need to present your findings and explain your conclusions on interest rates and compounding frequency. Thoughts to include in the report include: Is a savings account a good way to earn interest? When looking at opening a savings account, what should you look for: higher interest rate or more frequent compounding?
Be sure to cite your sources for the interest rates from the chosen financial institution!
Use exponents to calculate the amount of interest earned on an investment.
Evaluate formulas with exponents.
Convert interest rates to decimals.
Apply the order of operations.
ANSWER
FINANCIAL REPORT WORKSHEET
The Security National Bank website shows that the compounding frequency is annually. It gives varying interest rates for different amounts of saved money. A part of this is shown in the table below for savings on the bank’s website.
| TYPE | INTEREST RATE | APY |
| Regular Statement Savings | 0.05% | 0,05% |
| Serious on Savings (S.O.S) – under$500 | 0.06% | 0.06% |
| Serious on Savings (S.O.S) – $500 and over | 0.10% | 0.10% |
| Money market Gold Savings – $100,000 and over | 0.14% | 0,14% |
| Money Market Gold Savings – $40,000 – $99,999 | 0.11% | 0.11% |
| Money Market Gold savings-$2,500 – $39,999 | 0.08% | 0.08% |
Source: https://www.snbonline.com/rates/deposit-rates
Using the compound interest formula: where r is the interest rate, 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 invested as $1,000 for 1 year, the balance is
When the investing period is 5 years, the balance is
Assuming quarterly compounding interest for 1 year the balance is
While for 5 years, the balance is
The United Bank of Iowa interest rate for a savings account is 0.55% compounded annually.
Investing $1,000 for 1 year,
For five years,
It is important to compare the compounding frequency that interest is compounded in order to determine which frequency will result in more savings for the same invested amount and period of time.
Different financial institutions give different interest rates. For a savings account, one should compare the interest rates in order to determine which financial institution has the interest rate resulting in the highest balance in savings for the same amount of invested money and period of time.
From the above financial institutions, it is better to have a higher interest rate rather than interest compounded more often. This is evidenced by the balances of saving $1,000 at an interest rate of 0.10 and a compounding frequency of 1 year, the balance is $1,100. When the same amount is compounded quarterly the balance is $1,103.81. These savings balances obtained are lower than that obtained by a higher interest rate, 0.55, which gives a savings balance of $1,550 for one year.
References
smartasset. (n.d.). Retrieved February 5, 2021, from United Bank of Iowa Review: https://smartasset.com/checking-account/united-bank-of-iowa-banking-review-958
United Bank of Iowa. (n.d.). Retrieved February 5, 2021, from DepositAccounts: https://www.depositaccounts.com/banks/united-bank-of-iowa.html
