1. 7-8 simple and compound interest
Objective:
To solve simple interest problems
To solve compound interest PROBLEMS
Warm-Up
Calculate
5% of 320
25% of 600
80% of 950

2. 7-8 simple and compound interest
Objective:
To solve simple interest problems
To solve compound interest PROBLEMS
Homework Answers
6 hrs.
w = V / Lh
s = P / 4
x > 2
p = qd
a ≤ -3
s = ½r + 4
b > 24
m = n
6 weeks
75%
a = 2m – b
31.3
$4900

3. 7-8 simple and compound interest
Objective:
To solve simple interest problems
To solve compound interest PROBLEMS
Vocabulary:
principal – the initial amount of an investment or loan
interest – the cost of borrowing
interest rate – the percentage of the balance that an account earns over a period of time
simple interest – interest paid only on the principal

4. 7-8 simple and compound interest
Objective:
To solve simple interest problems
To solve compound interest PROBLEMS
Simple Interest Formula:
I = prt
I: Interest
p: principal
r: interest rate per year
t: time in years

5. 7-8 simple and compound interest
Objective:
To solve simple interest problems
To solve compound interest PROBLEMS
Example A
Suppose you deposit $1000 in a savings account that earns 6% simple interest per year. Find the interest earned in two years.
I = prt
I = 1000 (.06) (2)
I = 1000 (.06) (2) = $120
What is the total amount in the account after those two years?
$ $120 = $1120
What is the amount of interest earned in 6 months?
I = prt
I = 1000 (.06) (0.5)
I = 1000 (.06) (0.5) = $30

6. 7-8 simple and compound interest
Objective:
To solve simple interest problems
To solve compound interest PROBLEMS
Vocabulary:
principal – the initial amount of an investment or loan
interest – the cost of borrowing
interest rate – the percentage of the balance that an account earns over a period of time
simple interest – interest paid only on the principal
compound interest – interest paid on both the principal and any interest earned in previous periods
balance – the principal plus earned interest in previous periods

7. 7-8 simple and compound interest
Objective:
To solve simple interest problems
To solve compound interest PROBLEMS
Compound Interest Formula:
B = p(1 + r)n
B: Final Balance
p: principal
r: interest rate per each interest period
n: number of interest periods

8. 7-8 simple and compound interest
Objective:
To solve simple interest problems
To solve compound interest PROBLEMS
Example B
Suppose you deposit $400 in a savings account that earns 5% interest compounded annually. The balance of the account after 4 years is $ What is the balance of the account after another four years (total of 8 years)?
B = p(1 + r)n
B = 400( )8
B = 400( )8 ≈ 400(1.477) ≈ $590.98

9. 7-8 simple and compound interest
Objective:
To solve simple interest problems
To solve compound interest PROBLEMS
Example C
Find the balance on a deposit of $2500 that earns 3% interest compounded semi-annually for 5 years?
B = p(1 + r)n
B = 2500( )10
B = 2500( )10 ≈ 2500(1.16) ≈ $