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Notes 4.10

Notes 4.10. Compound Interest. Compound Interest Formula: . P  = principal amount (the initial amount you borrow or deposit) r   = annual rate of interest (as a decimal) t   = number of years the amount is deposited or borrowed for.

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Notes 4.10

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  1. Notes 4.10 Compound Interest

  2. Compound Interest Formula: • P = principal amount (the initial amount you borrow or deposit) • r  = annual rate of interest (as a decimal) • t  = number of years the amount is deposited or borrowed for. • A = amount of money accumulated after n years, including interest. • n  =  number of times the interest is compounded per year

  3. Compounding Words: • “Daily” =365 • “Monthly” = 12 • “Quarterly” =4 • “Semiannually”=2 • “Annually” = 1

  4. Ex: An amount of $1,500.00 is deposited in a bank paying an annual interest rate of 4.3%, compounded quarterly. What is the balance after 6 years? • P =1500 • r = .043 • t = 6 • n =4

  5. $6,500 at 8% compoundedmonthly for 7 years?  • P =6500 • r = .08 • t = 7 • n =12

  6. $4000 at 6%, compounded quarterlyfor 5 years?  • P =4000 • r = .06 • t = 5 • n =4

  7. A man invests $10, 000 in an account that pays 8.5% interest per year, compounded Daily. What will he have after 3 years?  • P =10,000 • r = .085 • t = 3 • n =365

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