Question

Step 1:	The interest in the account is compounded semiannually, so the interest is added to the principal every six months. Divide the annual amount of interest — 5 percent, i.e., .05 percent — by two to determine interest paid at the end of each six-month period. Every six months, the saver would receive .025 (.05 ÷ 2) interest on the principal plus any accumulated interest.
Step 2:	Multiply the principal (plus any accrued interest) by the interest rate. Round to the nearest hundredth. (For example, $25.625=$25.63.) Type your answer in the "Interest (i)"column.
Step 3:	Add the principal and interest to calculate the new principal amount. Write your answer in the "p + i" column.
Step 4:	Carry your answer from step 3 to the first column in the next row. Repeat steps 1 – 3. Note that the principal will change each time interest accrues.

Directions: Use the steps listed above to calculate Maria's interest after 6 months and 12 months. (Popup Calculator)

Months	Principal (p)	Interest (i)	p + i
6	$1,000.00	$	$
12	$	$	$

Fill in the table below to compare the totals for these savings options. (Popup Calculator)

Type of account	Original Principal	Interest after 12 months	Total principal and interest after 12 months
Zero-interest checking account	$1,000.00	$	$
5% compounded semiannually	$1,000.00	$	$

How much did Maria lose by keeping her money in a non-interest bearing account rather than putting it in an account that paid 5 percent compounded semiannually.
Type Your Response Here	Correct Response:
Question: 1—2—3…6

Imagine that instead of $1,000, Maria's grandmother had given her $10,000. After three years, how much interest would $10,000 have earned on a 5 percent compounded semiannually account? (Popup Calculator)

Months	Principal (p)	Interest (i)	p + i
6	$10,000.00	$	$
12	$	$	$
18	$	$	$
24	$	$	$
30	$	$	$
36	$	$	$

Answer 1

Months	Principal	Interest	P+I
6	1,000.00	25.00	1,025.00
12	1,025.00	25.63	1,050.63

Months	Principal	Interest	P+I
6	10,000.00	250.00	10,250.00
12	10,250.00	256.25	10,506.25
18	10,506.25	262.66	10,768.91
24	10,768.91	269.22	11,038.13
30	11,038.13	275.95	11,314.08
36	11,314.08	282.85	11,596.93

Type of Account	Principal	Interest	P+I
Zero	1,000.00	-	1,000.00
5% Semiannually	1,000.00	50.63	1,050.63
Difference	-	50.63	50.63