As a student of Economics for the 21st Century you will use the mechanism of COMPOUND INTEREST to grow your savings. The idea is fairly straight forward: The Principal, or amount of money in your account, is multiplied by the Rate of Interest, and the resulting sum is added to that Principal.
Complication: We must spread the Interest over 25 compounding periods, each of which is one week long. Given our present Interest Rate of 5%, we divide .05 by 25 to get .002%.
If you start with a balance in your savings account of F 10.00, you would at the end of week one multiply
F 10.00 x .002 to yield F 0.02. Then, add that earned interest to your original F 10.00 to yield F 10.02.
If you add no new funds to your account, you will at the end of week two repeat the process: 10.02 x .002 = F 0.02004. Using standard rounding rules, this equals another two cents, which increases the balance to F 10.04.
As time goes on, you will begin to see that compounding is, indeed, magic. In order to make it work, however, you must "feed the pig" by injecting regular additions of principal to your account.
Complication: We must spread the Interest over 25 compounding periods, each of which is one week long. Given our present Interest Rate of 5%, we divide .05 by 25 to get .002%.
If you start with a balance in your savings account of F 10.00, you would at the end of week one multiply
F 10.00 x .002 to yield F 0.02. Then, add that earned interest to your original F 10.00 to yield F 10.02.
If you add no new funds to your account, you will at the end of week two repeat the process: 10.02 x .002 = F 0.02004. Using standard rounding rules, this equals another two cents, which increases the balance to F 10.04.
As time goes on, you will begin to see that compounding is, indeed, magic. In order to make it work, however, you must "feed the pig" by injecting regular additions of principal to your account.