1. Pre-Algebra Simple and Compound Interest Suppose you deposit $1,000 in a savings account that earns 6% in interest per year. Lesson 7-8 a. Find the interest earned in two years. Find the total of principal plus interest. The account will earn $120 in two years. The total of principal plus interest will be $1,120. I = prtUse the simple interest formula. I = 1,000 0.06 2Replace p with 1,000, r with 0.06, and t with 2. I = 120Simplify. total = 1,000 + 120 = 1,120Find the total. Additional Examples

2. Pre-Algebra Simple and Compound Interest (continued) Lesson 7-8 b. Find the interest earned in six months. Find the total of principal plus interest. The account will earn $30 in six months. The total of principal plus interest will be $1,030. I = prtUse the simple-interest formula. I = 1,000 0.06 0.5Replace p with 1,000, r with 0.06, and t with 0.5. I = 30Simplify. Total = 1,000 + 30 = 1,030Find the total. Write the months as part of a year. t = = = 0.5 1212 6 12 Additional Examples

3. Pre-Algebra Year 5 : $486.20486.20 0.05 = 24.31486.20 + 24.31 = 510.51 Year 6 : $510.51510.51 0.05 25.53510.51 + 25.53 = 536.04 Year 7 : $536.04536.04 0.05 26.80536.04 + 26.80 = 562.84 Year 8 : $562.84562.84 0.05 28.14562.84 + 28.14 = 590.98 Simple and Compound Interest You deposit $400 in an account that earns 5% interest compounded annually (once per year). The balance after the first four years is $486.20. What is the balance in your account after another 4 years, a total of 8 years? Round to the nearest cent. Lesson 7-8 After the next four years, for a total of 8 years, the balance is $590.98. Interest Balance Principal at Beginning of Year Additional Examples

4. Pre-Algebra Simple and Compound Interest Find the balance on a deposit of $2,500 that earns 3% interest compounded semiannually for 4 years. Lesson 7-8 The interest rate r for compounding semiannually is 0.03 ÷ 2, or 0.015. The number of payment periods n is 4 years  2 interest periods per year, or 8. The balance is $2,816.23. B = p(1 + r) n Use the compound interest formula. B = 2,500(1 + 0.015) 8 Replace p with 2,500, r with 0.015, and n with 8. Use a calculator. Round to the nearest cent.B 2,816.23 Additional Examples