Presentation is loading. Please wait.

Presentation is loading. Please wait.

Sullivan PreCalculus Section 4.7 Compound Interest Objectives of this Section Determine the Future Value of a Lump Sum of Money Calculate Effective Rates.

Similar presentations


Presentation on theme: "Sullivan PreCalculus Section 4.7 Compound Interest Objectives of this Section Determine the Future Value of a Lump Sum of Money Calculate Effective Rates."— Presentation transcript:

1 Sullivan PreCalculus Section 4.7 Compound Interest Objectives of this Section Determine the Future Value of a Lump Sum of Money Calculate Effective Rates of Return Determine the Present Value of a Lump Sum of Money Determine the Time Required to Double or Triple a Lump Sum of Money

2 Interest is the money paid for the use of money. The total amount borrowed is called the principal. The rate of interest, expressed as a percent, is the amount charged for the use of the principal for a given period of time, usually on a yearly (per annum) basis.

3 The amount A after t years due to a principal P invested at an annual interest rate r compounded n times per year is Simple Interest Formula I = Prt

4 Suppose your bank pays 4% interest per annum. If $500 is deposited, how much will you have after 3 years if interest is compounded … a) Annually (b) Monthly

5 The amount A after t years due to a principal P invested at an annual interest rate r compounded continuously is Suppose your bank pays 4% interest per annum. If $500 is deposited, how much will you have after 3 years if interest is compounded continuously?

6 The present value P of A dollars to be received after t years, assuming a per annum interest rate r compounded n times per year, is If interest is compounded continuously, then

7 How much should you deposit today in order to have $20,000 in three years if you can earn 6% compounded monthly from a bank C.D.?

8 How long will it take to double an investment earning 10% per annum compounded quarterly?


Download ppt "Sullivan PreCalculus Section 4.7 Compound Interest Objectives of this Section Determine the Future Value of a Lump Sum of Money Calculate Effective Rates."

Similar presentations


Ads by Google