Simple and Compound Interest COURSE 3 LESSON 6-8 Simple and Compound Interest 3 4 You deposit $950 into an account that earns 4 % interest compounded annually. Find the balance in the account after five years. In your last calculation, round to the nearest cent. Year Start of Interest End of Year 1 $950.00 0.0475 • 950 = 45.125 950 + 45.125 = 995.125 2 $995.125 995.125 + 47.268 = 1,042.393 0.0475 • 995.125 47.268 3 $1,042.393 1,042.393 + 49.514 = 1,091.907 0.0475 • 1,042.393 49.514 4 $1,091.907 1,091.907 + 51.866 = 1,143.773 0.0475 • 1,091.907 51.866 5 $1,143.773 1,143.773 + 54.329 = 1,198.10 0.0475 • 1,143.773 54.329 At the end of 5 years, the balance in the account is $1,198.10. 6-8

Simple and Compound Interest COURSE 3 LESSON 6-8 Simple and Compound Interest You invest $225 for four years at an interest rate of 6 % compounded annually. What is your final balance? 1 2 B = p(1 + r)n Use the compound interest formula. B = 255(1 + 0.065)4 Substitute: p = 225, r = 0.065, n = 4. 255 1 0.065 4 289.45493 Use a calculator. Round to the nearest cent. $289.45 After 4 years, your balance will be $289.45. 6-8

Simple and Compound Interest COURSE 3 LESSON 6-8 Simple and Compound Interest 1. You deposit $80 into an account that earns 6% simple interest. Find the amount of interest earned in 3 years. Then find the final balance after 3 years. 2. You deposit $80 into an account that earns 6% compounded annually. How much will be in the account in 3 years? $14.40; $94.40 $95.28 6-8