2 DO NOW… Using the following formula I = p r t Alice Tsongas deposited $600 in a new account at Bradenton Savings and Loan Association. No other deposits or withdrawals were made. After 3 months the interest was computed at an annual interest rate of 3 ½ percent.Using the following formulaFind out how much simple interest Alice earned on her savings.I = p r t
3 I = ($600)(0.035)(1) = $21 I = ($600)(0.035)(3/12) =$5.25 DO NOW…Alice Tsongas deposited $600 in a new account at Bradenton Savings and Loan Association. No other deposits or withdrawals were made. After 3 months the interest was computed at an annual interest rate of 3 ½ percent.I = p r tI = ($600)(0.035)(1) = $21I = ($600)(0.035)(3/12) =$5.25
4 When you deposit money in a bank, you EARN money for it When you deposit money in a bank, you EARN money for it. This is called interest.When you borrow money from a bank, you are expected to pay for it. This money is also called interest.The PRINCIPAL is the original amount of money you deposit or borrow.I = p r tI ….. Is the interest earnedp….. Is the principalr…….is the interest rate per yeart…….time in year
5 Find the Simple Interest You borrow $300 for 5 years at an annual interest rate of 4%.What is the simple interest you pay in dollars ?I = p r tI = ($300)(0.04)(5) = $60
6 You have $500 in an account that earns an annual rate of 5. 1% You have $500 in an account that earns an annual rate of 5.1%. At the end of each year, you withdraw the interest you have earned. Lets Graph the total interest you earn after 1, 2, 3 and 4 years.Time (yr)Interest ($)125.50251.00376.504102.00
7 Today’s AssignmentComplete Questions on page 35 of your Work Book
8 Do Now…On May 1, Cleveland Livingston opened a savings account that paid 3.5% exact interest at Fulton Savings Bank with a deposit of $5,000. Ten days later he deposited $2,000. Fourteen days later he deposited $8,000. No other deposits or withdrawals were made. Six days later the bank calculated the daily interestPrincipalRateTimeInterest$5000X.03510/365 (.0274)=$4.79$700014/365 (.0384)$9.40$150006/365 (.0164)$8.63Total Interest$22.82Total amount in the account after 30 days$15,022.82How much simple Interest did his money earn?How much was in the account at the end of the 30 days?
9 COMPOUND INTERESTCOMPOUND INTEREST is the interest paid on the original principal and on any interest that has been left in the account.THE BALANCE of an account is the principal plus the interest earned… Big with Credit Card Companies
10 B=p(1+r) t Know the Formula B ------- is the Balance P is the Principalr is the interest rate per yeart is the time in years
11 Total Balance after 9 years $6,964.07 Find the Compound InterestYou deposit $5,000 in a bank account that pays 3.75% compound interest.What is your balance after 9 years?B = p (1 + r)t9B = 5,000 ( )B = 5,000 ( )B = 6,964.07Total Balance after 9 years $6,964.07
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