1. Press Ctrl-A ©G Dear 2009 – Not to be sold/Free to use Compound Interest Stage 5 - Year 10

2. 2 Compound Interest (1/4) future value$10 000 10%p.a.3 years What is the future value of $10 000 at 10% p.a. for 3 years? PrincipalYear 1 Principal Year 1 = $10 000 Interest Year 10.10 Interest Year 1 = 0.10 x $10 000= $1 000 Principal Year 2 Principal Year 2 = $10 000 + $1 000= $11 000 Interest Year 20.10 Interest Year 2 = 0.10 x $11 000 = $1 100 Principal Year 3 Principal Year 3 = $11 000 + $1 100= $12 100 Interest Year 30.10 Interest Year 3 = 0.10 x $12 100 = $1 210 Future Value Future Value = $12 100 + $1 210 $13 310 = $13 310 Initial

3. 3 Compound Interest Formula (2/4) future value$10 000 10%p.a.3 years What is the future value of $10 000 at 10% p.a. for 3 years? P = $ 10 000 n = 3 years r = 0.10 A = P(1 + r) n = 10 000(1 + 0.10) 3 = 10 000 x 1.10 3 = $13 310

4. 4 Compound Interest (3/4) Fry remembers he had a bank account back in the twentieth century. Surprisingly his old bank account is still active, and has been accruing interest for the past thousand years, bringing the balance from 93 cents to $4.3 billion. Was the interest really $4.3 billion? Futurama Episode – April 27 th 1999 A Fishful of Dollars (S1/E6) Video Clip Video Clip

5. 5 Compound Interest (4/4) Futurama Episode – April 27 th 1999 A Fishful of Dollars (S1/E6) P = $ 0.93 n = 1 000 years Video Clip Video Clip r = 2.25% A = P(1 + r) n = 0.93(1 + 0.0225) 1000 = 0.93 x 1.0225 1000 = $4 283 508 450 = $4.3 Billion