1 / 10

3.5 Compound Interest Formula

3.5 Compound Interest Formula. Imagine you deposit $10,000 in a five-year cd . The account pays 5.2% interested compounded daily. How much will your $10,000 investment be worth by the end of the 5 years?. Compound Interest Formula. B = ending balance. p = principal. r = interest rate.

raven-dejesus
Download Presentation

3.5 Compound Interest Formula

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. 3.5 Compound Interest Formula

  2. Imagine you deposit $10,000 in a five-year cd. The account pays 5.2% interested compounded daily. How much will your $10,000 investment be worth by the end of the 5 years?

  3. Compound Interest Formula B = ending balance p = principal r = interest rate n = number of compounds per year t = time (in years)

  4. Number of Compounds • Annually • n = 1 • Semiannually • n = 2 • Quarterly • n = 4 • Daily • n = 365 (or 366 in a leap year)

  5. Marie deposits $1,650 for three years at 3% interest, compounded daily. What is her ending balance? p = $1,650 r = 0.03 n = 365 t = 3

  6. Kate deposits $2,350 in an account that earns interest at a rate of 3.1%, compounded monthly. What is her ending balance after 5 years? p = $2,350 r = 0.031 n = 12 t = 5

  7. 3.5 Compound Interest Formula

  8. APR vs. APY • APR • Annual interest rate • APY • Actual rate you earn with compounding interest • To find APY:

  9. Sharon deposits $8,000 in a one year CD at 3.2% interest, compounded daily. What is Sharon’s APY?

  10. Barbara deposits $3,000 in a one year CD at 4.1% interest, compounded daily. What is her APY for the account?

More Related