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Compound Interest. Interest Definition: A charge for borrowed money generally a percentage of the borrowed amount. Context: A person makes a deposit with.

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Presentation on theme: "Compound Interest. Interest Definition: A charge for borrowed money generally a percentage of the borrowed amount. Context: A person makes a deposit with."— Presentation transcript:

1 Compound Interest

2 Interest Definition: A charge for borrowed money generally a percentage of the borrowed amount. Context: A person makes a deposit with a financial institution, which promises a certain rate of interest per year, paid after specified intervals of time. This is a growth problem! Examples: Savings account, loans, credit cards, etc.

3 Compound Interest Definition: Interest charged on both the principal amount as well as on the interest already earned. When entering an equation into the calculator do not forget the parentheses.

4 Compound Interest Example Find an equation for the following context if the input is the number of years: Fred invests $12,000 in an account that offers 3.2% annual interest compounded semiannually. 3.2% = The initial value Decimal Rate Number of Intervals 2 times a year

5 Compound Interest Example Continued… Fred invests $12,000 in an account that offers 3.2% annual interest compounded semiannually. If there are no withdrawals, how much money is in the account after 5 years? x = 5 years


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