Topic: Compounding Interest and the Banker
There are many factors influencing the cost of money for both individuals and corporations.
In some cases, cash flows are received in advance, and in other cases, cash flows are received at the end of a period. In still other cases, cash flows are received either quarterly, semi-annually, or yearly. How often interest compounds also has an effect on the cost of money.
• Find out what your bank is currently paying in interest on a savings account, and when they pay this interest. • Report how your bank collects interest on their consumer loans. • Explain how the way they collect and pay interest has an effect on interest compounding and on the cost of capital.
