1. Simple Interest and Compound Interests

4. Simple interest: P(t)=P0+(P0 ∙ r)t P(t) = Balance over time
P0 = principal: amount you start with
r = rate of interest
t= time in years

5. Simple interest: P(t)=P0+(P0 ∙ r)t P(1)=3000+(3000 ∙ .05)1
If you invest $3,000 at 5% for one year, how much will you make for the year?
Simple interest: P(t)=P0+(P0 ∙ r)t
P(1)=3000+(3000 ∙ .05)1
You made $3,150 for the year.

6. Compound interest formula:
Formula: P(t) = P0(1+r)t
P(t) = balance over time
P0 = initial principal
r = rate (decimal…move two spaces)
t = time in years

7. Find the total amount in your account if you start with $750 at 7
Find the total amount in your account if you start with $750 at 7.5% interest for 2.5 years.
P(t) = P0(1+r)t
P(2.5) = 750( )2.5
P(2.5) = 750(1.075)2.5 (use a calculator here!)
P(2.5) = $898.63

8. How much should you invest at 7% to have $200 after 5 years?
P(t) = P0(1+r)t (Plug in what you know.)
200 = P0 (1.07)5 (get P0 alone, 1 step equation...)
142.60= P0

9. If you put $100 in the bank at 4% interest and leave it until you are 60, how much money will you have?
P(t) = P0(1+r)t
P(46) = 100(1.04)46 (This assumes you are currently 14)
P(46) =

10. What about a mutual fund that pays 10% interest?
P(t) = P0(1+r)t
P(46) = 100(1.10)46
P(46) =

11. Mario deposits $1000 into a compound interest account
Mario deposits $1000 into a compound interest account. The interest rate for the account is 5%. The function P(t) = 1000 ∙ 1.05t represents the balance in the account as a function of time. Use a graphing calculator to estimate the number of years it will take for the account balance to reach each given amount.
P(t) = 1000 ∙ 1.05t
How many years to earn:
1. $
2. $15000…
3. Quadruple the initial deposit…