Introduction
In this WebQuest, students will develop a better sense of how exponential functions are related to the world of finance.
Task
After many years of wisely spending and saving, you've managed to save up $10,000! You've decided that it's time to open up a savings account with this money. However, to get the most out of your money, you should do some research and determine which bank will help you profit the most. After speaking with family, friends, and colleagues, you've decided to look into some of the larger banks in the US: Bank of America, JP Morgan Chase Bank, Wachovia Bank, Wells Fargo Bank, Citibank, and SunTrust Bank. You'll need to check out the different saving account options these banks offer, including their interest rates and how often they compound interest.
Process
Think about all the different ways you spend your money, such as water bill, electricity, food, travel, savings, entertainment, car, shopping, phones, music etc.
How much of it do you save for your future, for security, for emergencies?
Investing money in a bank is a great way to safely store your finances while making money. "Making money?!" you may ask. Yes! With most banks, when you deposit money (known as the principal), the bank pays you a certain percentage depending on how much you invest with them. This percentage is called an interest rate, and the dollar amount you receive is called the interest. Different banks vary in interest rates and in how they calculate interest. The higher the interest rate, the more interest you will receive. When a bank adds the interest to your account, we call it "compounding." When interest is compounded to your account, that money, in addition to your principal, also begins to accrue interest. Therefore, the more often the bank compounds, the more interest you obtain in the long run.
The formula for calculating compound interest is:
A = P(1 + r/n)nt
where:
A = the amount after time t
P = the principal amount, or initial investment
r = the annual interest rate (expressed as a decimal)
n = the number of times the interest is compounded per year
t = time in years
To complete this analysis, follow the three steps below:
(1) Visit the websites for each of the following banks. For each bank, visit the "Savings" page to find out more about their Savings Accounts. Some may require a state or zip code in order to determine the correct rates.
Bank of America: www.bankofamerica.com
JP Morgan Chase Bank: www.chase.com
CitiBank: www.citibank.com
SunTrust Bank: www.suntrust.com
Wachovia Bank: www.wachovia.com
Wells Fargo Bank: www.wellsfargo.com
(2) Create a table similar to the one below and fill in the respective boxes:
a) For each bank, determine the type of savings account that will provide the best interest. You will need to take into account interest rates and compounding periods. Be careful of extra fees or minimum deposits.
b) If you were to deposit your $10,000 into each of these accounts, determine the value of your account after 10, 25, and 40 years. Show your work.
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Name of Bank |
Name of Savings Account |
Annual Interest Rate |
# of Times Compounded per Year |
Account Value after 10 years |
Account Value after 25 years |
Account Value after 40 years |
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Bank of America |
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JP Morgan Chase Bank |
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CitiBank |
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SunTrust Bank |
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Wachovia Bank |
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Wells Fargo Bank |
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(3) Answer the following Discussion Questions:
a) Which bank and savings account provides the most interest earned? Which bank and savings account provides the least interest earned? How do you know?
b) How often do these banks compound? How much of a difference do the compounding periods make?
c) For each of the accounts picked in part (a), how long will it take to reach $15,000? What is the difference in these time periods? Show your work in these calculations.
for more information:
Evaluation
Your project will be evaluated on the following criteria:
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Needs Improvement (0 – 2.0 pts) |
Meets Criteria (2.5 – 3.0 pts) |
Exceeds Criteria (3.5 pts) |
Excellent (4.0 pts) |
Score | |
| Table |
Over half of the data is missing or is incorrect. |
Some of the data is missing or is incorrect. |
A couple data items are missing or are incorrect. |
All data is present and correct. |
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| Use of Exponential Models |
No work is shown, equations are incorrect, and/or results are incorrect. |
Some work is shown, some equations are correct, and/or there are several computational mistakes. |
Work is shown, equations are correct, but minor computational mistakes. |
Work is shown, and equations and results are correct. | |
| Discussion Questions |
No or majority incorrect responses to discussion questions. |
Responded to all discussion questions, but responses are incorrect. |
Responded to all discussion questions, but a few are incorrect. |
Responded to all discussion questions correctly. |
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| Presentation |
Presentation lacks parts and/or not presented in the form required. Lacking any form of order/neatness. |
Presentation is missing a part of is hard to read/understand. Little attention to neatness. |
Presentation includes all necessary information, but is unorganized or lacking in neatness. |
Presentation includes all required materials, and is neat, organized, and easy to read/understand. |
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Total Score (Out of 16 pts) |
Conclusion
After completing this WebQuest, you should have a better understanding of one of the most common ways we use exponential equations in the real world. In addition, you hopefully made some progress in deciding where you should invest your own finances as well.
Please take some time to review your findings and be prepared to discuss them with the class.