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Interest, Loans, and Credit

Many young people are unfamiliar with the concepts of simple interest and compound interest, and how the different rates could impact their wallet over a number of years. In this program, a teen planning to purchase a new bike investigates several financing options: personal loans, interest-free loans, store credit, credit cards, and investing her money in a savings account. Using spreadsheets and comparisons, the video clarifies each of her various choices, considering fees and charges, interest earned or paid, and how long it will take to achieve the savings goal. A viewable/printable worksheet is available online. (17 minutes)

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Comparing Simple and Compound Interest
Simple interest is represented by the formula I = P x Interest Rate x Number f Years, or I = PRT. Compound interest means that interest earned in period one is added to the principal and interest at the end of period two is calculated on this new amount.