tulations!Congra You ﬁnall y have a job! Time to buy stuﬀ!
New T V! How abo ut that ch oice HDT V Only $2000.00…not much when you have a job… …. right???
ee mone y…?Fr You’re a l iJle short o n cash How about a CREDIT CARD? NOW…Pay LATER! Buy
x actly f reeNot e Not quite free…bu sUll a gre t at deal! You’ll have to pay later, but you get the HDTV NOW!
w it worksHo Put $200 0.00 on t he card… …pay $2000.00 back later. R ight???
not so muchYeah… Put $200 0.00 on t he card… ack $2000.0 0 (If you Pay b the ENTIRE $2000.00 pay b ack when t he ﬁrst bill comes)
interest$2000.00 % + Principal Interest = What you PAY
interest IF YOU PAY $2000.00 + IT OFF 10 % Interest IMMEDIATELY! = $2200.00
interest NO BIG DEAL $2000.00 Only $200.00 + extra 10 % Interest …and I sUll get = the TV now! $2200.00
NO PE!Meet your ne w friend! COMPOUND INTEREST This is Compound Interest. He is horrible and he hates you.
2 kinds of inte rest SIMPLE INTEREST 1 Pay a percent of what you bor row. Usually on a schedule (10% for 2 years)
2 kinds of inte rest COMPOUND INTEREST 2 Pay a percent of what you bor row but MORE int erest compounds o n top of the princip al AND interest you owe.
ex ample Simple interest $2000.00 The amount y ou have to pay b + ack is $2200, no 10 % Interest maJer how l ong = it takes. $2200.00
ex ample The amount y ou have to pay bCompound recalculated e ack is interest ach billing period . It is $2000.00 a percent of t he + amount you borrowed AN10 % Interest D the original amou = nt of $2200.00 interest. + 2.5% + 2.5% + 2.5%