1. SECTION
5-5
Compound Interest pp

2. Key Words to Know compound interest (p. 208)
Interest earned not only on the principal in a bank account, but also on the interest earned on the account, or interest on interest.

3. Formula 1
Amount = Principal + Interest

4. Formula 2
Compound Interest = Amount – Original Principal

5. P=Principal
T= # of years
R = Rate
N = Times per year

6. Example 1
Dr. Evil deposited $1,800 in a savings account, which earns 6 percent interest that is compounded quarterly. He made no deposits or withdrawals.
What is the amount in the account at the end of the second quarter?

7. Example 1 Answer
Step: Find the amount for each quarter.

8. Example 1 Answer (cont.)

9. P=1800
R = .06
N = 4
T= .5
= $

10. Example 2
In Example 1 Dr. Evil deposited $1,800 in a savings account that earns 6 percent interest compounded quarterly. You determined that the amount in his account at the end of the second quarter was $1,
What is the compound interest?

11. Example 2 Answer Step: Figure out the compound interest.
Amount – Original Principal
$1, – $1, = $54.41

12. : #2-14