COMPOUND INTEREST Since this section involves what can happen to your money, it should be of INTEREST to you! 

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Presentation transcript:

COMPOUND INTEREST Since this section involves what can happen to your money, it should be of INTEREST to you! 

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 is compounded

Example 1 Find the amount that results from $500 invested at 8% compounded quarterly after a period of 2 years. 4 (2) .08 500 4

Example 2 Suppose you invest $32,000 into a certificate of deposit that has an annual interest rate of 5.2% compounded annually. Find the total amount after 3 years.

Example 3 $800 is invested at 7% for 6 years. Find the interest if it is compounded daily.

Example 4 $32000 is invested at 10% for 2 years. Would you earn more money in your investment if the interest was compounded semiannually or monthly?

Example 5 Iggy invested $12,000 with an interest rate of 8% compounded annually. How long will it take him to earn $17,631.94?

Example 6 Vinnie invested $1000 with a interest rate of 6% compounded semiannually. How long will it take Vinnie to double his investment?

Example 7 Joey invested $13200, compounded quarterly, and after 7 years, he had earned $22680.06. What was Joey’s interest rate?

Example 8 Anthony needs $3300 in 4 years so he can install an in-ground pool in his back yard. If he invests money at an interest rate of 11% compounded daily, how much money should he invest?

Example 9 Caesar is about to graduate high school. His father gives him two options: He can have $2500, invested at 8% compounded quarterly, and receive the money in 5 years He can agree to a flat sum of $3800 in 5 years. Which option should Caesar take?