4.2 Compound Interest Day 2. Compound Interest A = P(1 + ) nt A = amount of $ accumulated P = initial amount of $ invested (principle) r = rate of interest.

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4.2 Compound Interest Day 2

Compound Interest A = P(1 + ) nt A = amount of $ accumulated P = initial amount of $ invested (principle) r = rate of interest (be sure to change to a decimal before plugging into the equation) n = # of times interest is compounded per year t = # of years

Example 1 Karen Estes just received an inheiritance of $10,000 and plans to place it in a savings account that pays 5% interest compounded quarterly, to help her son go to college in 3 years. How much will she have saved in 3 years?

Example 3 A principle of $25,000 is invested in an account paying an annual percentage rate of 5%. Find the amount in the account after 2 years if compounded Semiannually Quarterly Monthly

Example 4 Brian, Eric, Manny and Melissa would like to go to Disneyland in 3 years. Their total cost should be about $4,500. If each invests $1,000 in a savings account paying 5.5% interest, and it is compounded semiannually, will they have enough money in 3 years to take their trip?