“Interest rate formulas” 2/10/14 “Interest rate formulas” For each form of interest below, what is the formula and what do the variables mean? simple interest compound interest On desk: Compound interest problems

Simple Interest formula I = Prt I = interest earned/paid P = principal amount r = rate of interest (% to decimal) t = time (years)

Compound Interest formula A = P(1 + r)t A = total amount of $$ earned/paid P = principal amount r = rate of interest (% to decimal) t = time (years)

2/10/14 Econ. Agenda Go over compound interest HW problems Compound vs. simple interest – How much of a difference is there? HW: Compound vs. Simple Interest Rates wksht due Wed. (A) &Thurs. (C) Financial Literacy Quest #1 tomorrow (open notebook)

$ 1,711.85 $ 8,458.11 $ 563.73 $ 246.59 $ 392.93 $ 187.57 $ 12,388.25 $ 1,217.01 $ 1,473.01 $ 5,162,353.38 $ 7,579.33 $ 4,111.45

2/10/14 Class Notes APY vs. APR Annual Percentage Yield Banks pay you Simple interest Simple interest makes $$ grow Annual Percentage Rate YOU owe the Bank Compound Interest Compound Interest makes $$ grow faster

Compound vs Simple Interest Chart How much of a difference is there between simple and compound interest? You research… College loans Savings accounts …to find out!