1. Compound Interest
Making Money!!!

2. Compound Interest Solving by Hand
A=P(1+r/n)nt
P - Initial principal
r – annual rate expressed as a decimal
n – compounded n times a year
t – number of years
A – amount in account after t years

3. Number of Times Compounded
Annually – 1 year
Quarterly – 4
Monthly – 12
Weekly – 52
Daily - 365

4. Compound interest example
You deposit $1000 in an account that pays 8% annual interest.
Find the balance after I year if the interest is compounded with the given frequency.
a) annually b) quarterly c) daily
A=1000(1+ .08/1)1x1
= 1000(1.08)1
≈ $1080
A=1000(1+.08/4)4x1
=1000(1.02)4
≈ $
A=1000(1+.08/365)365x1
≈1000( )365
≈ $

5. TVM Solver in Calculator
Start with the APPS Button
Go to the Finance App
Go to TVM Solver
N= Years X ___
I%= Interest
PV= Present Value
PMT= Payment
FV= Future Value
P/Y=
C/Y=
Depending on the question being ask, or the information given, different information will be entered.

6. Example 1:
Marie deposits $1,650 for three years at 3% interest, compounded daily. What is her ending balance? N= 3 x 365 I%=3 PV=-1650 PMT=0 FV=Alpha Solve P/Y=365 C/Y=365 Answer: $1,805.38

7. Example 2:
Sharon deposits $8,000 in a one year CD at 3.2% interest, compounded weekly.
What is her ending balance?
Answer : $8,
What would be the ending balance if the interest was compounded monthly?
Answer: $8,258.79
What would be the balance if the interest was compounded quarterly?
Answer: $8,259.09