Section 4.7: Compound Interest

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Presentation transcript:

Section 4.7: Compound Interest

Simple Interest Formula P = Principal invested (original amount) r = Interest rate t = # of years

Compound Interest Formula P = Principal invested (original amount) r = Interest rate t = # of years n = # of times interest compounded per year A = Amount after t years

Compound Interest Example Charlie has $600 to invest. He chooses a bank that offers him 5.2% interest that compounds monthly. a) How much will Charlie have in his account after 3 years? b) How long will Charlie have to wait for his investment to double?

Compound Interest Practice When Dani was born, her parents put away $10,000 into a savings account at 4.75% compounded quarterly. a) How much will Dani have in her account at age 18? b) How long will it take for Dani’s college fund to triple? c) How much should Dani’s parents have put away when she was born to have reached $100,000 by the time she was 18?

Section 4.7: Compound Interest Homework #20: Page 322 # 5, 7, 13, 17, 23, 37