6.2B – Compound Interest Formula Objective: TSW calculate how much an investment increases using the compound interest formula.

Compound Interest Formula Total amount of an investment Principal (how much did you invest initially/start amount) Time (IN YEARS) its invested The number of times the interest is compounded per year Interest rate in decimal form.

Some Key Terms to Help You Determine what “n” is:  Annually – once a year  Semiannually – twice a year  Quarterly – 4 times a year  Weekly – 52 times a year  Daily – 365 times a year  Monthly – 12 times a year  Bimonthly – 6 times a year

Examples: 1. Find the final amount of a $400 investment after 10 years at an 8% interest compounded annually and daily.

2. $1500 at a 4.25% interest rate compounded daily for 30 years.

Find the Initial Amount IF: 3. After 12 years, Joe withdraws all his money ($7,000) from his savings account that paid 1.2% compounded bimonthly.

Find the initial amount IF: 4. After 25 years, Gary withdraws all his money from his retirement account ($25,000) that paid 4.5% compounded daily.

Homework!!!! pg. 488 #’s 6, 20-23(all) pg. 488 #’s 6, 20-23(all)