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Planning Ahead Saving money is an important part of financial freedom and responsibility. What are the advantages of having a savings account?

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daily compounding Interest that is computed each day and added to the account balance. Lesson Objective Calculate the interest for daily compounding. Content Vocabulary daily compounding

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You deposit $8,000 in an account that pays 5.5 percent interest compounded daily. How much interest will you earn in 31 days? Example 1

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Find the amount of $1.00 for 31 days using the following table. Example 1 Answer: Step 1

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Figure 5.6

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Find the amount. Original Principal × Amount of $1.00 $8,000.00 × 1.00468 = $8,037.44 Example 1 Answer: Step 2

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Find the compound interest. Amount – Original Principal = Compound Interest $8,037.44 – $8,000.00 = $37.44 Example 1 Answer: Step 3

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On May 31, Deloris Zelms deposited $1,000 in a saving account that pays 5.5 percent interest compounded daily. On July 1 how much interest had been earned on the principal in her account? Example 2

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Find the number of days from May 31 to July 1. Use the Elapsed Time Table on page A10 of your textbook. July 1 is day 182. May 31 is day 151. 182 – 151 = 31 days Example 2 Answer: Step 1

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Find the amount of $1.00 for 31 days using the Compound InterestAmount of $1.00 table on page A10 of your textbook. It is 1.00468. Example 2 Answer: Step 2

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Find the amount. Original Principal × Amount of $1.00 $1,000.00 × 1.00468 = $1,004.68 Example 2 Answer: Step 3

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Find the compound interest. Amount – Original Principal $1,004.48 – $1,000.00 = $4.68 Example 2 Answer: Step 4

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On April 20, Veronica Osborne deposited $1,600 in a savings account. The account pays 5.5 percent interest compounded daily. How much interest will the money earn by May 26? Practice 1

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$8.69 Practice 1 Answer

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Isabella Achacoso has a balance of $20,000 in her savings account on July 3. That same day, she deposits $2,000 in her account. She deposits another $1,000 on July 19. What amount will she have in her account on July 31 if it pays 5.5 percent interest compounded daily? How much is compound interest? Practice 2

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Amount in account on July 31: $23,094.52 Compound interest: $94.52 Practice 2 Answer

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Simple Interest. is money added onto the original amount saved (earned) or borrowed (charged). Simple Interest.

Simple Interest. is money added onto the original amount saved (earned) or borrowed (charged). Simple Interest.

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