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Daily Compounding pp. 214-216 5-7 SECTION

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Click to edit Master text styles Second level Third level Fourth level Fifth level 2 SECTION Copyright © Glencoe/McGraw-Hill MBA, Section 5-7, Slide 2 of 21 5-7 daily compounding (p. 214) Interest on an account that is computed each day and added to the account balance. Key Words to Know

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Click to edit Master text styles Second level Third level Fourth level Fifth level 3 SECTION Copyright © Glencoe/McGraw-Hill MBA, Section 5-7, Slide 3 of 21 5-7 Amount = Original Principal × Amount of $1.00 Formula 1

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Click to edit Master text styles Second level Third level Fourth level Fifth level 4 SECTION Copyright © Glencoe/McGraw-Hill MBA, Section 5-7, Slide 4 of 21 5-7 Compound Interest = Amount – Original Principal Formula 2

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Click to edit Master text styles Second level Third level Fourth level Fifth level 5 SECTION Copyright © Glencoe/McGraw-Hill MBA, Section 5-7, Slide 5 of 21 5-7 You deposit $8,000 in an account that pays 5.5 percent interest compounded daily. How much interest will you earn in 31 days? Example 1

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Click to edit Master text styles Second level Third level Fourth level Fifth level 6 SECTION Copyright © Glencoe/McGraw-Hill MBA, Section 5-7, Slide 6 of 21 5-7 Find the amount of $1.00 for 31 days using the following table. Example 1 Answer: Step 1

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Click to edit Master text styles Second level Third level Fourth level Fifth level 7 SECTION Copyright © Glencoe/McGraw-Hill MBA, Section 5-7, Slide 7 of 21 5-7 Figure 5.6

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Click to edit Master text styles Second level Third level Fourth level Fifth level 8 SECTION Copyright © Glencoe/McGraw-Hill MBA, Section 5-7, Slide 8 of 21 5-7 Find the amount. Original Principal × Amount of $1.00 $8,000.00 × 1.00468 = $8,037.44 Example 1 Answer: Step 2

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Click to edit Master text styles Second level Third level Fourth level Fifth level 9 SECTION Copyright © Glencoe/McGraw-Hill MBA, Section 5-7, Slide 9 of 21 5-7 Find the compound interest. Amount – Original Principal = Compound Interest $8.037.44 – $8,000.00 = $37.44 Example 1 Answer: Step 3

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Click to edit Master text styles Second level Third level Fourth level Fifth level 10 SECTION Copyright © Glencoe/McGraw-Hill MBA, Section 5-7, Slide 10 of 21 5-7 On May 31, Deloris Zelms deposited $1,000 in a saving account that pays 5.5 percent interest compounded daily. On July 1 how much interest had been earned on the principal in her account? Example 2

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Click to edit Master text styles Second level Third level Fourth level Fifth level 11 SECTION Copyright © Glencoe/McGraw-Hill MBA, Section 5-7, Slide 11 of 21 5-7 Find the number of days from May 31 to July 1. Use the Elapsed Time Table on page 796 of your textbook. July 1 is day 182. May 31 is day 151. 182 – 151 = 31 days Example 2 Answer: Step 1

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Click to edit Master text styles Second level Third level Fourth level Fifth level 12 SECTION Copyright © Glencoe/McGraw-Hill MBA, Section 5-7, Slide 12 of 21 5-7 Find the amount of $1.00 for 31 days using the Compound Interest—Amount of $1.00 table on page 796 of your textbook. It is 1.00468. Example 2 Answer: Step 2

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Click to edit Master text styles Second level Third level Fourth level Fifth level 13 SECTION Copyright © Glencoe/McGraw-Hill MBA, Section 5-7, Slide 13 of 21 5-7 Find the amount. Original Principal × Amount of $1.00 $1,000.00 × 1.00468 = $1,004.68 Example 2 Answer: Step 3

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Click to edit Master text styles Second level Third level Fourth level Fifth level 14 SECTION Copyright © Glencoe/McGraw-Hill MBA, Section 5-7, Slide 14 of 21 5-7 Find the compound interest. Amount – Original Principal $1,004.48 – $1,000.00 = $4.68 Example 2 Answer: Step 4

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Click to edit Master text styles Second level Third level Fourth level Fifth level 15 SECTION Copyright © Glencoe/McGraw-Hill MBA, Section 5-7, Slide 15 of 21 5-7 On April 20, Veronica Osborne deposited $1,600 in a savings account. The account pays 5.5 percent interest compounded daily. How much interest will the money earn by May 26? Practice 1

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Click to edit Master text styles Second level Third level Fourth level Fifth level 16 SECTION Copyright © Glencoe/McGraw-Hill MBA, Section 5-7, Slide 16 of 21 5-7 $8.69 Practice 1 Answer

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Click to edit Master text styles Second level Third level Fourth level Fifth level 17 SECTION Copyright © Glencoe/McGraw-Hill MBA, Section 5-7, Slide 17 of 21 5-7 Isabella Achacoso has a balance of $20,000 in her savings account on July 3. That same day, she deposits $2,000 in her account. She deposits another $1,000 on July 19. What amount will she have in her account on July 31 if it pays 5.5 percent interest compounded daily? How much is compound interest? Practice 2

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Click to edit Master text styles Second level Third level Fourth level Fifth level 18 SECTION Copyright © Glencoe/McGraw-Hill MBA, Section 5-7, Slide 18 of 21 5-7 Amount in account on July 31: $23,094.52 Compound interest: $94.52 Practice 2 Answer

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215-216: #3-13

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