Do Now If you did not finish it yesterday, put your worksheet into the basket In the standard form y = a•bx, what does each variable represent? If Ms. Taylor bought a textbook for her college class for $1500 and it loses value by 50% each year, when will her textbook be less than $500? When will her textbook be less than $25?

Compound Interest MONEY!!

Think about this: East Mecklenburg invested $8000 into the bank. Earning 5% compounded quarterly, how much money will East Mecklenburg have in the bank in 5 years? What do we need to know in order to answer this question?

The phrase compounded quarterly should have set off an alarm. We cannot simply use the standard form of an exponential function to solve this type of problem. We need a new formula…

Compound Interest: A = the balance($$) P = Principle (initial/starting amount) r = the annual interest rate (decimal) t = time in years n = the number of times interest is compounded per year

Compound Interest: n = the number of times interest is compounded per year Annual: n = 1 Semiannual: n = 2 Quarterly: n = 4 Monthly: n = 12 Daily: n = 365

So now that we know the formula… East Mecklenburg invested $8000 into the bank. Earning 5% compounded quarterly, how much money will East Mecklenburg have in the bank in 5 years?

Suppose that when your friend was born, your friend’s parents deposited $2000 in an account paying 4.5% interest compounding semiannually. What will the balance be after 18 years when they go to college?

You go to a bank with an investment of $5000 You go to a bank with an investment of $5000. The bank gives you a choice of an interest rate 5% compounding monthly or an interest rate of 7% compounding quarterly. In ten years which choice would earn you more money?

$4000 principle earning 6% compounding annually after 5 years? $500 principle earning 4% compounding quarterly after 10 years?

$2000 principle earning 5.4% compounding semiannually after 4 years $6500 principle earning 2.8% compounding monthly after 2 years

Worksheet