 Compound Interest.

Presentation on theme: "Compound Interest."— Presentation transcript:

Compound Interest

Interest Definition: A charge for borrowed money generally a percentage of the borrowed amount. Context: A person makes a deposit with a financial institution, which promises a certain rate of interest per year, paid after specified intervals of time. This is a growth problem! Examples: Savings account, loans, credit cards, etc.

Compound Interest Definition: Interest charged on both the principal amount as well as on the interest already earned. When entering an equation into the calculator do not forget the parentheses.

Compound Interest Example
Find an equation for the following context if the input is the number of years: Fred invests \$12,000 in an account that offers 3.2% annual interest compounded semiannually. 2 times a year . . 3.2% = 0.032 . 2 1 Decimal Rate The initial value Number of Intervals

Compound Interest Example
Continued… Fred invests \$12,000 in an account that offers 3.2% annual interest compounded semiannually. If there are no withdrawals, how much money is in the account after 5 years? x = 5 years