1. MAT 142 Lecture Video Series

2. Compound Interest (MAT 142)

3. Compound Interest (MAT 142)
Objectives
Calculate a periodic rate.
Calculate the future value of a compound interest loan.
Calculate the annual yield of a loan.
Calculate the present value of a compound interest loan given its future value.

4. Compound Interest (MAT 142)
Vocabulary
compound interest
compounding period
periodic rate
annual yield
nominal rate

5. Compound Interest (MAT 142)
Formulas
Compound Interest Future Value Formula
Annual Yield Formula
(always 1 year)

6. Compound Interest (MAT 142)
Find the periodic rate that corresponds to 12% annual interest compounded
quarterly
monthly
daily
biweekly
semi-monthly

7. Compound Interest (MAT 142)
Find the future value of $12,350 at 6% annual interest compounded daily for 10 years.

8. Find the future value of $7300 at 7% compounded annually for 13 years.
Compound Interest (MAT 142)
Find the future value of $7300 at 7% compounded annually for 13 years.

9. Compound Interest (MAT 142)
Find the present value that will generate $1000 at 8% compounded annually for 7 years.

10. Find the annual yield corresponding to
Compound Interest (MAT 142)
Find the annual yield corresponding to

11. Compound Interest (MAT 142)
First Arizona Savings offers 5-year CDs at 8.25% compounded daily, and the Bank of Tempe offers 5-year CDs at 8.28% compounded annually. Compute the annual yield for each institution and determine which is more advantageous for the consumer.

12. Compound Interest (MAT 142)
When Mike Jones was born, his grandparents deposited $5,000 into a special account for Mike’s college education. The account earned 7¼ % interest compounded daily.
How much will be in the account when Mike is eighteen?
If, on becoming eighteen, Mike arranged for the monthly interest to be sent to him, how much would he receive each 30-day month?

13. Compound Interest (MAT 142)
David McKemy wants to have an IRA that will be worth $150,000 when he retires at age sixty-five.
How much must he deposit at age twenty-
six at compounded daily?
If, at age sixty-five, he arranges for the monthly interest to be sent to him, how much will he receive each 30-day month?

14. Creator and Producer Elizabeth Jones for The School of Mathematical and Statistical Sciences at Arizona State University Videographer Mike Jones ©2009 Elizabeth Jones and School of Mathematical and Statistical Sciences at Arizona State University