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, Replace p with 1,000, r with 0.06, and t with 2. I = 120Simplify. total = 1, = 1,120Find the total. Additional Examples

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, Replace p with 1,000, r with 0.06, and t with 0.5. I = 30Simplify. Total = 1, = 1,030Find the total. Write the months as part of a year. t = = = Additional Examples

Pre-Algebra Year 5 : $ = = Year 6 : $ = Year 7 : $ = Year 8 : $ = 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 $ 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 $ Interest Balance Principal at Beginning of Year Additional Examples

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 The number of payment periods n is 4 years  2 interest periods per year, or 8. The balance is $2, B = p(1 + r) n Use the compound interest formula. B = 2,500( ) 8 Replace p with 2,500, r with 0.015, and n with 8. Use a calculator. Round to the nearest cent.B 2, Additional Examples