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Individual Assessment: Exponential Growth

To begin your journey, ask yourself, &quot;Why save money?&quot; Is there anything you need to buy in

the future that you do not have enough money for today? How will you save this money? How

long will it take until you make the purchase? Think about the answers to these questions as

you design a scenario.

Part I: Scenario

You are saving up for a major purchase. The purchase could be college tuition, an

entertainment system, a car, or any other purchase you desire.

Now it's time to show off your creativity! Create, and submit to your instructor, a fantasy

purchase scenario. You must include the responses to each of the following questions about

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What will you buy? (Provide a detailed description of the major purchase.)

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Why do you want to make this purchase?

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What is the purchase price? (Choose an amount between \$10,000 and \$15,000.)

Part II: Research

Now it's time to find out how much interest you can earn as you save for this big purchase. You

will research a compound interest savings account at a local bank or credit union. You may visit

the bank and interview a bank teller or pick up a pamphlet. You could also research the bank on

the internet. Be sure to follow the guidelines and safety precautions for completing internet

searches.

include the labels:

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Name of Bank

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Name/Type of Account

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Interest Rate

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Compounding Frequency

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Source (e.g., website, teller's name, etc.)

Imagine your parent(s)/guardian(s) have offered you a similar savings deal with simple interest.

They will pay you the same interest rate as the bank, but they will pay simple interest instead of

compound interest.

Part III: Calculations and Graphs

Compare your options by performing some calculations and creating some graphs. You must

show your work on all calculations.

1 Calculate the amount of your compound interest investment after 10 years. Remember that

you are starting with \$7,500.

2 Calculate the amount of your simple interest investment after 10 years. Remember to use the

same rate and compounding as in #1.

3 Create a graph that shows the growth of your compound interest and simple interest

investment investment over time.

Example of using the tool for compound interest, with a \$10,000 principal and a rate of 4.1%

compounded daily.

Notice that A= was not included, that 10 was used instead of 10,000 (because this graph is

scaled in thousands), that a carat symbol ^ (shift-6) was used for exponents, and x was used

instead of t. The parentheses are also very important.

To copy the graph into your assignment to turn in, go to the File menu in the tool, then select

Export &gt; Graphics View to Clipboard. You can then Paste the picture into your document.

Created with GeoGebra

Part IV: Analysis

Now you will compare the two investments. Which is more beneficial and why? Respond to

each of the following questions using complete sentences.

1 What is the difference between the graph of a simple interest investment and the graph of a

compound interest investment?

2 What is the difference between a simple interest investment and a compound interest

investment?

3 About how long will it take for you to save enough money to make your purchase based on

the compound interest graph?

4 About how long will it take for you to save enough money to make your purchase based on

the simple interest graph?

5 Which investment (simple or compound) is more beneficial and why?

6 In your research, did you find any accounts that offered simple interest?

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If so, provide a description of where you found them.

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If not, why do you think were unable to find them?

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