Compound Interest SWBAT compute compound interest using a table.

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Compound Interest SWBAT compute compound interest using a table

Definitions Compound interest The interest paid on the principal and on the interest accumulated to date The interest paid on the principal and on the interest accumulated to dateBalance The sum of the principal plus the interest earned The sum of the principal plus the interest earned

Think Mrs. Farrell deposits $12,000 in a savings account for Emily. The bank pays interest quarterly at an annual interest rate of 6%. How much money will she have in the bank at the end of 1 year?

Find the Balance Turn to page 200 in your textbooks Find the interest rate per period Find the interest rate per period Divide the annual rate by the number of periods Quarterly = 4 times a year Semi-annually = 2 times a year Annually = 1 time a year Find the percentage you calculated on the chart Find the percentage you calculated on the chart Multiply the deposit by the factor given Multiply the deposit by the factor given Subtract the principal from the balance to find the interest that was earned Subtract the principal from the balance to find the interest that was earned

Calculating Interest Periods Compounded annually for 8 years Compounded semi-annually for 4.5 years Compounded quarterly for 6 years Compounded semi-annually for 6 months

Examples $7000 at an annual rate of 8%, compounded quarterly for 1 year $10,000 at an annual rate of 7%, compounded semi-annually, for 2 years Josie deposits $5000 in an account. The annual interest rate is 8%, compounded semi-annually. How much interest will she earn in 1 year?

Examples Caitlin deposits $4000 in her savings account. The annual interest rate is 12%, compounded quarterly. How much interest will she earn in 2 years?

Try This Save-here Bank pays 5% annual interest compounded semi-annually. Earn-lots Bank pays 5% annual interest compounded quarterly. Samuel wants to invest $2000 for 18 months. Which bank pays more interest? How much more? Save-here: 2.5% per period Save-here: 2.5% per period Earn-lots: 1.25% per period Earn-lots: 1.25% per period Save: 3 periods Earn: 6 periods Save: 3 periods Earn: 6 periods Save: · 2000 Earn: · 2000 Save: · 2000 Earn: · 2000 Save: $153.80Earn: $ Save: $153.80Earn: $ Earn –lots will pay $1 more in interest Earn –lots will pay $1 more in interest