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8.6 Problem Solving: Compound Interests

Learn how to calculate compound interest and simple interest using the formulas I = prt and A = p(1 + r)t. Discover how much you can earn from investments and savings over time.

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8.6 Problem Solving: Compound Interests

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  1. 8.6 Problem Solving: Compound Interests

  2. Simple interest: I=prt I = interest p = principal: amount you start with r = rate of interest t= time in years

  3. If you invest $3,000 at 5% for one year, how much will you make for the year? I = prt = 3000  0.05  1 = 150 You made $150 for the year.

  4. Compound interest formula: A = p(1+r)t A = balance p = principal r = rate t = time in years

  5. Find the total amount in your account if you start with $750 at 7.5% interest for 2.5 years. A = p(1+r)t = 750(1+0.075)2.5 = 750(1.075)2.5 (use a calculator here!) = $898.63

  6. How much should you invest at 7% to have $200 after 5 years? A = p(1+r)t (Plug in what you know.) 200 = p(1.07)5 (get p alone, then use a calculator.) 142.60= p

  7. If you put $100 in the bank at 4% interest and leave it until you are 60, how much money will you have? A = p(1+r)t = 100(1.04)46 (This assumes you are currently 14) = 607.48

  8. What about a mutual fund that pays 10% interest? A = p(1+r)t = 100(1.10)46 = 8017.95

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