1. INTEREST

2. Simple Interest Compound Interest SIMPLE INTEREST VS. COMPOUND INTEREST Interest earned on the principal investment Earning interest on interest Principal is the original amount of money invested or saved

3. $1,000.075$350 SIMPLE INTEREST P (Principal) r (Interest Rate) t (Time Period) I (Interest Earned) $1,000 invested at 7% interest rate for 5 years P (Principal) I (Interest Earned) A (Amount Investment is Worth) $ 1,000 $350$1,350 Compute InterestAdd Interest to Principal

4. $2,500.06510$1625 SIMPLE INTEREST P (Principal) r (Interest Rate) t (Time Period) I (Interest Earned) $2,500 invested at 6.5% interest rate for 10 years P (Principal) I (Interest Earned) A (Amount Investment is Worth) $2,500$1625$4,125 Compute InterestAdd Interest to Principal

5. $500.03520$350 SIMPLE INTEREST P (Principal) r (Interest Rate) t (Time Period) I (Interest Earned) $500 invested at 3.5% interest rate for 20 years P (Principal) I (Interest Earned) A (Amount Investment is Worth) $500$350$850 Compute InterestAdd Interest to Principal

6. COMPARISON PrincipalRateTimeSimple Compound Annually Compound Monthly Compound Daily $1,0007%5 yrs$1,350 $2,5006.5%10 yrs$4,125 $5003.5%20 yrs$850 $2,0001.5%7 yrs $10,0002%15 yrs $5,0000.5%20 yrs $2,210 $13,000 $5,500

7. COMPOUND INTEREST EQUATION $1,000 invested at 7% interest rate compounded yearly for 5 years $1,000 (1+.07) 1x5 1 r = Interest Rate A = Amount Investment is Worth P = Principal t = number of years P 1 + = A ( ) rnrn nt n = # of times per year =$1,403 = $1,000 (1.07) 5

8. COMPOUND INTEREST EQUATION $1,000 invested at 7% interest rate compounded monthly for 5 years $1,000 (1+.07) 12x5 12 r = Interest Rate A = Amount Investment is Worth P = Principal t = number of years P 1 + = A ( ) rnrn nt n = # of times per year =$1,417 = $1,000 (1.00583) 60

9. COMPOUND INTEREST EQUATION $1,000 invested at 7% interest rate compounded daily for 5 years $1,000 (1+.07) 365x5 365 r = Interest Rate A = Amount Investment is Worth P = Principal t = number of years P 1 + = A ( ) rnrn nt n = # of times per year =$1,419 = $1,000 (1.00019178) 1825

10. COMPOUND INTEREST EQUATION $2,500 invested at 6.5% interest rate compounded yearly for 10 years $2,500 (1+.065) 1x10 1 r = Interest Rate A = Amount Investment is Worth P = Principal t = number of years P 1 + = A ( ) rnrn nt n = # of times per year = $4,693 = $2,500 (1.065) 10

11. COMPOUND INTEREST EQUATION $2,500 invested at 6.5% interest rate compounded monthly for 10 years $2,500 (1+.065) 12x10 12 r = Interest Rate A = Amount Investment is Worth P = Principal t = number of years P 1 + = A ( ) rnrn nt n = # of times per year = $4,780 = $2,500 (1.005416) 120

12. COMPOUND INTEREST EQUATION $2,500 invested at 6.5% interest rate compounded daily for 10 years $2,500 (1+.065) 365x10 365 r = Interest Rate A = Amount Investment is Worth P = Principal t = number of years P 1 + = A ( ) rnrn nt n = # of times per year = $4,787 = $2,500 (1.000178) 3650

13. COMPOUND INTEREST EQUATION $500 invested at 3.5% interest rate compounded yearly for 20 years $500 (1+.035) 1x20 1 r = Interest Rate A = Amount Investment is Worth P = Principal t = number of years P 1 + = A ( ) rnrn nt n = # of times per year = $995 = $500 (1.035) 20

14. COMPOUND INTEREST EQUATION $500 invested at 3.5% interest rate compounded monthly for 20 years $500 (1+.035) 12x20 12 r = Interest Rate A = Amount Investment is Worth P = Principal t = number of years P 1 + = A ( ) rnrn nt n = # of times per year = $1006 = $500 (1.0029167) 240

15. COMPOUND INTEREST EQUATION $500 invested at 3.5% interest rate compounded daily for 20 years $500 (1+.035) 365x20 365 r = Interest Rate A = Amount Investment is Worth P = Principal t = number of years P 1 + = A ( ) rnrn nt n = # of times per year = $1007 = $500 (1.00009589) 7300

16. COMPARISON PrincipalRateTimeSimple Compound Annually Compound Monthly Compound Daily $1,0007%5 yrs$1,350 $2,5006.5%10 yrs$4,125 $5003.5%20 yrs$850 $2,0001.5%7 yrs $10,0002%15 yrs $5,0000.5%20 yrs $2,210 $13,000 $5,500 $1,403$1,417$1,419 $4,693$4,780$4,787 $1,007 $1,006 $995 $2,220 $2,221 $13,459 $13,495 $13,498 $5,524 $5,526