1. SIMPLE AND COMPOUND INTEREST
Since this section involves what can happen to your money, it should be of INTEREST to you!

2. Warm Up: Find 6% of $400. Find 5% of $2,000. Find 4.5% of $700.

3. Warm Up: Find 6% of $400. Find 5% of $2,000. Find 4.5% of $700.
$24
$100
$31.50
$17.88

4. 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

5. I = PRT IMPLE INTEREST FORMULA Annual interest rate Interest paid
Time (in years)
Principal (Amount of money invested or borrowed)

6. Simple Interest Equation: Step 1
(Principal) r
(Interest Rate) t
(Time Period) I
(Interest Earned)
1,000
.07 5
350.00
$1,000 invested at 7% interest rate for 5 years

7. If you invested $ in an account that paid simple interest, find how long you’d need to leave it in at 4% interest to make $10.00.
enter in formula as a decimal
I = PRT
10 = (200)(0.04)T
1.25 yrs = T
Typically interest is NOT simple interest but is paid semi-annually (twice a year), quarterly (4 times per year), monthly (12 times per year), or even daily (365 times per year).

8. COMPOUND INTEREST FORMULA
annual interest rate (as a decimal)
Principal (amount at start)
time (in years)
amount at the end
number of times per year that interest in compounded

9. 4
(2)
.08
500 4
Find the amount that results from $500 invested at 8% compounded quarterly after a period of 2 years.

10. 4
(2)
.08
500 4
Find the amount that results from $500 invested at 8% compounded quarterly after a period of 2 years.

11. Smart Investing OR Which would you choose?
An investment earning compound
interest
An investment earning simple interest OR
Largest return