Compound Interest

A = P(1 + r/n)nt A is the total amount after interest is added (the balance). P is the principal (initial amount of money) r is the annual interest rate (percent changed into a decimal) n is the number of times in a year it is compounded t is the time in years

Compound Interest $1000 is invested at a rate of 3% compounded quarterly for 5 years. Write the function Take the 3% and divide it by 4 (Quarterly means 4 times a year) Make it a decimal and add it to one (1 + 0.03/4) y = 1000 • (1 + 0.03/4)x Replace x with 20 (5 years, 4 times a year) $1161.18

$18,000 invested at a rate of 4.5% compounded semi annually for 6 years Find the growth factor 0.045 divided by 2 (Semi annually means twice a year) 0.045/2 (1 + 0.045/2) Write the function y = 18000 • (1 + 0.045/2) x Replace x with 12 (twice a year for 6 years) $23,508.90

$4,500 in deposited in a savings account. The account receives 4 $4,500 in deposited in a savings account. The account receives 4.5% interest compounded monthly for 10 years. 𝐴=4500(1+ 0.045 12 ) 10·12 $7051.47