2 InterestThe amount of money pair or earned for the use of money by a back or financial institution.
3 Simple Interest I = Interest Paid only on the initial principal of savings account or a loan.I = InterestP=Principal (the amount of money invested or borrowedr= annual interest rate (as a decimal)T= time (years)
4 Find the simple interest of $2,250 at 6% for 4 years t-= 4 years
5 Suppose Josh placed $2400 in the bank for 5 years. He makes $9 Suppose Josh placed $2400 in the bank for 5 years. He makes $9.20 on interest each month. Find the annual interest rate.Hint: Time needs to be in years not in monthsP=$2400R= xT= 5 yearsI= $9.20 (60) = $552why did we multiply by 60?12 (5) =60I= prt552=2400(x)(5)552= 12000x0.046= x4.6%
6 Mr. Gabel borrowed $1860 to buy a computer. He will pay $71 Mr. Gabel borrowed $1860 to buy a computer. He will pay $71.30 per month for 30 months. Find the simple interest rate for his loan.P= 1860R= xT= 30 months = 2.5 yearsTo find out how much Interest he pays:71.30(30)=$2139$=279I=$279I=prt279=1860 (r)(2.5)279= 4650r0.06 =r6%
7 Compound InterestPaid on the initial principal and on interest earned in the pastHint: t= 1 year and repeat process for every year with new principal
8 What is the total amount of money in an account where $5000 is invested at an interest rate of 5% compounded annually after 3 yearsYear 1:Year 2:Year 3I=prtI=(5000)(0.05)(1)I=(5250)(0.05)(1)I=5512.5(0.05)(1)I= 250I=262.50I=After the first year you have:After year 2 you have:After 3 years you have:=5250==$5,788.13