Math – Solving Problems Involving Interest 1

________ - an initial amount of money borrowed or invested ________ - an amount of money that is a percent of the principal ____________ - a percent used to calculate interest ______________ - interest calculated using only the original principal and the amount of time the principal earns interest 2

________ - an initial amount of money borrowed or invested ________ - an amount of money that is a percent of the principal ____________ - a percent used to calculate interest ______________ - interest calculated using only the original principal and the amount of time the principal earns interest 3 Principal

________ - an initial amount of money borrowed or invested ________ - an amount of money that is a percent of the principal ____________ - a percent used to calculate interest ______________ - interest calculated using only the original principal and the amount of time the principal earns interest 4 Principal Interest

________ - an initial amount of money borrowed or invested ________ - an amount of money that is a percent of the principal ____________ - a percent used to calculate interest ______________ - interest calculated using only the original principal and the amount of time the principal earns interest 5 Principal Interest Interest rate

________ - an initial amount of money borrowed or invested ________ - an amount of money that is a percent of the principal ____________ - a percent used to calculate interest ______________ - interest calculated using only the original principal and the amount of time the principal earns interest 6 Principal Interest Interest rate Simple interest

ex: Suppose you put $100 in an account that earns 5% simple interest. 7 Simple Interest Time Balance Beginning$100 1 year later 2 years later 3 years later

ex: Suppose you put $100 in an account that earns 5% simple interest. 8 Simple Interest Time Balance Beginning$100 1 year later 2 years later 3 years later

ex: Suppose you put $100 in an account that earns 5% simple interest. 9 Simple Interest Time Balance Beginning$100 1 year later 2 years later 3 years later

ex: Suppose you put $100 in an account that earns 5% simple interest. 10 Simple Interest Time Balance Beginning$100 1 year later 2 years later 3 years later

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Ex 1. Mike invests $800 at 6% simple interest. 14 TimeInterest EarnedFinal Balance 1 year 5 years 60 days

Ex 1. Mike invests $800 at 6% simple interest. 15 TimeInterest EarnedFinal Balance 1 year 5 years 60 days

Ex 1. Mike invests $800 at 6% simple interest. 16 TimeInterest EarnedFinal Balance 1 year 5 years 60 days

Ex 1. Mike invests $800 at 6% simple interest. 17 TimeInterest EarnedFinal Balance 1 year 5 years 60 days

Ex 1. Mike invests $800 at 6% simple interest. 18 TimeInterest EarnedFinal Balance 1 year 5 years 60 days

Ex 1. Mike invests $800 at 6% simple interest. 19 TimeInterest EarnedFinal Balance 1 year 5 years 60 days

Ex 1. Mike invests $800 at 6% simple interest. 20 TimeInterest EarnedFinal Balance 1 year 5 years 60 days

Ex 1. Mike invests $800 at 6% simple interest. 21 TimeInterest EarnedFinal Balance 1 year 5 years 60 days

Ex 1. Mike invests $800 at 6% simple interest. 22 TimeInterest EarnedFinal Balance 1 year 5 years 60 days

Ex 1. Mike invests $800 at 6% simple interest. 23 TimeInterest EarnedFinal Balance 1 year 5 years 60 days

__________________ - interest calculated based on principal and prior earned interest ___________________________ - an interest rate used to calculate compound interest 24

__________________ - interest calculated based on principal and prior earned interest ___________________________ - an interest rate used to calculate compound interest 25 Compound interest

__________________ - interest calculated based on principal and prior earned interest ___________________________ - an interest rate used to calculate compound interest 26 Compound interest Annual Percentage Rate (APR)

ex: Suppose you put $100 in an account that earns 5% APR (compounded annually). 27 Compound Interest Time Balance Beginning$100 1 year later 2 years later 3 years later

ex: Suppose you put $100 in an account that earns 5% APR (compounded annually). 28 Compound Interest Time Balance Beginning$100 1 year later 2 years later 3 years later

ex: Suppose you put $100 in an account that earns 5% APR (compounded annually). 29 Compound Interest Time Balance Beginning$100 1 year later 2 years later 3 years later

ex: Suppose you put $100 in an account that earns 5% APR (compounded annually). 30 Compound Interest Time Balance Beginning$100 1 year later 2 years later 3 years later

ex: Suppose you put $100 in an account that earns 5% APR (compounded annually). 31 Compound Interest Time Balance Beginning$100 1 year later 2 years later 3 years later

ex: Suppose you put $100 in an account that earns 5% APR (compounded annually). 32 Compound Interest Time Balance Beginning$100 1 year later 2 years later 3 years later

ex: Suppose you put $100 in an account that earns 5% APR (compounded annually). 33 Compound Interest Time Balance Beginning$100 1 year later 2 years later 3 years later

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36 Annually1 Semiannually2 Quarterly4 Monthly12 Daily365

Ex 2. Henry invests $2000 with an APR of 6%. If the interest is compounded monthly, how much will he have after 1 year? After 4 years? 37

Ex 2. Henry invests $2000 with an APR of 6%. If the interest is compounded monthly, how much will he have after 1 year? After 4 years? 38