Compound Interest. A = New balance after interest P = Principle amount invested or borrowed. R = Interest Rate usually given as a percent (must changed.

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Simple and Compound Interest

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Presentation transcript:

Compound Interest

A = New balance after interest P = Principle amount invested or borrowed. R = Interest Rate usually given as a percent (must changed to decimal before plugging it into formula) T = Time ( in years) Compound interest A =P(1 + r) t

EX1) A principle of $5,000 is invested at 4.5% for 2 years. I = PRT I= I=$450 5, XX Simple Compound A =P(1 + r) t A =5,000( ) 2 A = $5, Compound Interest paid after 2 years is A-P=I Find the compound interest. More interest is accumulated when using compound interest than when you use simple interest Compare simple and compound interest – 5000=

EX2) A =P(1 + r) t A = 16,595 A = $20, You finance a loan to buy a car for $16,595 with an interest rate of 3.9%. Find the amount you must pay back using compounded interest for 60 months. ( ) 5 How much interest will you pay at the end of 5 years? B – P = $20, $16,595 = $3,498.47

Essential Question Explain how compound interest differs from simple interest?

Date ____________ Compound Interest

A = P = _________ amount invested or borrowed. R = Interest _____ usually given as a percent (must changed to decimal before plugging it into formula) T = _____ ( in years) Compound interest A =

EX1) A principle of _________ is invested at ____% for __ years. Simple Compound A = Compound Interest paid after 2 years is Find the compound interest. Compare simple and compound interest

EX2) A = You finance a loan to buy a car for _________with an interest rate of ____%. Find the amount you must pay back using compounded interest for __________. How much interest will you pay at the end of __years?

Essential Question Explain how compound interest differs from simple interest?