3E Economics par. 3.1

• Economie
• Middelbare school
• vwo
• Leerjaar 3

Reasons to save money

Interest

Simple interest  <--------------> Compound interest 

( usually ) when borrowing                        ( usually ) when saving        interest on fixed amount                           interest upon interest          

interest settled every year ( period )                                                             

Stop Motion

Simple or compound interest?

How big is the interest difference between simple and compound interest?

compound interest

year 1: € 2,- x 1,10 = € 2,20

year 2: € 2,20 x 1,10 = € 2,42

Richard has € 4.000,- on his savings account on 1/1/2019 and the interest is 5%.
How much will be on his savings account on 31/12/2022?

1. € 4.600
2. € 4.631
3. € 4.800
4. € 4.862

compound interest

4.000 x 1,05 = 4.200

4.200 x 1,05 = 4.410

4.410 x 1,05 = 4.630,50

4.630,50 x 1,05 = 4.862,03

Richard has € 4.000,- on his savings account on 1/1/2019 and the interest is 5%.
How much will be on his savings account on 31/12/2052?
Do you feel like calculating this?

1. Yes
2. No

compound interest

4.000 x 1,05 = 4.200

4.200 x 1,05 = 4.410

4.410 x 1,05 = 4.630,50

4.630,50 x 1,05 = 4.862,03

4.000 x ( 1,05 ) ^ 4 = 4.862,03

compound interest

End amount = 4.000 x (1,05)^4 = 4.862,03

End amount = 4.000 x (1,05)^34 = 21.013,39

Formula 

E = B x (1+p)^t

compound interest

year 1: € 2,- x 1,10 = € 2,20

year 2: € 2,20 x 1,10 = € 2,42

End amount = 2 x (1,10)^2 = 2,42

Formula 

E = B x (1+p)^t

939,39

904,50

867,61

886,74

€ 700, 8yr, 3%

€ 750, 2,5yr, 6%

€ 800, 3yr, 5,5%

Hw.

Par. 3.1 assignment 3

Assignments from the paragraphs:

Par. 3.1 assignments 1, 2, 4, 5, 6, 7, 10

Par. 3.1 Question 3a

1. 500 x 0,10 x 5
2. 500 x 0,10 x 5 + 500
3. 500 x ( 1,10 ) ^ 5
4. 500 x ( 1,10 ) ^ 5 - 500

Par. 3.1 Question 3b

1. 1127 - 8 x 0,10 x 1127
2. 1127 / ( 1,10 ) ^ 8

Par. 3.1 Question 3c

1. 500 x 0,10 x 8
2. 500 x 0,10 x 8 + 500
3. 500 x ( 1,10 ) ^ 8
4. 500 x ( 1,10 ) ^ 8 - 500

Arnold wants to go on a trip around the world in 4 years. He estimates it will cost him € 15.000 at that time. The interest rate is 3%. How much money does he need to put on his savings account now to ensure he has enough?

Amount x ( 1,03 ) ^ 4 = 15.000

Amount = 15.000 / ( 1,03 ) ^ 4 = 13.327,31

B = E / ( 1+p ) ^ t

Insurance

Phone theft insurance. 30 students in class, chance of stolen phone is 10%, loss € 400,- per phone.
What premium should the teacher minimally ask?
( no euro sign, dots or decimals, so f.e. 50 )

Number of phones stolen = 10% x 30 = 3

Total damage = 3 x 400 = 1.200

Premium = 1.200 / 30 = € 40,-

Would you take the phone insurance for € 40,-?

1. Yes
2. No

Insurance

Voluntary:

You can decide yourself whether you insure or not

Based on chance of damage, size of damage and premium

Mandatory:

F.e. basic health insurance

car insurance for damage to others

Insurance

Non-life insurance <-------------> Life insurance

Non-life insurance: f.e.  - damage, health

Life insurance: f.e. - at passing away for relatives

- at life as extra on top of your pension, old age benefit

Hw.

Par. 3.1 assignments 9

Assignments from the paragraphs:

Par. 3.1 assignments 1, 2, 4, 5, 6, 7, 10