COMPOUND INTEREST Objective: You will be able to apply the formula for compound interest to a given problem or word problem.

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COMPOUND INTEREST Objective: You will be able to apply the formula for compound interest to a given problem or word problem.

COMPOUND INTEREST FORMULA

COMPOUND INTEREST FORMULA annual interest rate (as a decimal) Principal (amount at start) time (in years) amount at the end number of times per year that interest in compounded

Compound Interest Period Interest Credited Times Credited per year Rate per compounding period Annual Semiannual Quarterly Monthly Daily

Compound Interest Period Interest Credited Times Credited per year Rate per compounding period Annual year 1 R Semiannual 6 months 2 Quarterly quarter 4 Monthly month 12 Daily day 365

Example Suppose you invest $32,000 into a certificate of deposit that has an annual interest rate of 5.2% compounded annually for 3 years 1 (3) .052 32,000 1

Find the amount that results from $500 invested at 8% compounded quarterly after a period of 2 years. 4 (2) .08 500 4