PLEASE NOTE!! If you have not completed your Checking Account Project yet, you have 30 minutes to work on it. It is a project grade To get reminders about.

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PLEASE NOTE!! If you have not completed your Checking Account Project yet, you have 30 minutes to work on it. It is a project grade To get reminders about tests, quizzes and other items, please send a text to 81010 with @ah2efg in the message field

3-4 EXPLORE COMPOUND INTEREST Banking 5/19/2019 3-4 EXPLORE COMPOUND INTEREST OBJECTIVES Understand the concept of getting interest on your interest. Compute compound interest Chapter 1

What is compound interest? Compound interest is money earned on money deposited plus previous interest Compounding can be: Annually Semiannually Quarterly Monthly Daily

Example 1 How much interest would $1,000 earn in one year at a rate of 6%, compounded annually? What would be the new balance?

Example 2 Maria deposits $1,000 in a savings account that pays 6% interest, compounded semiannually. What is her balance after one year? CHECK YOUR UNDERSTANDING Alex deposits $4,000 in a savings account that pays 5% interest, compounded semiannually. What is his balance after one year?

EXAMPLE 3 How much interest does $1,000 earn in three months at an interest rate of 6%, compounded quarterly? What is the balance after three months?

EXAMPLE 4 How much interest does $1,000 earn in one day at an interest rate of 6%, compounded daily? What is the balance after a day?

Example 5 Jennifer has a bank account that compounds interest daily at a rate of 3.2%. On July 11, the principal is $1,234.98. She withdraws $200 for a car repair. She receives a $34 check from her health insurance company and deposits it. On July 12, she deposits her $345.77 paycheck. What is her balance at the end of the day on July 12?

CHECK YOUR UNDERSTANDING On January 7, Joelle opened a savings account with $900. It earned 3% interest, compounded daily. On January 8, she deposited her first paycheck of $76.22. What was her balance at the end of the day on January 8?