1. Journal
How can interest (APR) be good and bad?

2. Simple VS. Compound Interest
Interest Day 1 Notes

3. VOCABULARY
Principal:
Simple Interest:
Compound Interest:

4. COMPARING SIMPLE & COMPOUND INTEREST
Scenario 1: You invest $1000 in an account that pays 5% simple interest every year. How much do you get from interest every year? How much do you have in your account after 5 years? Scenario 2: You invest $1000 in an account that pays 5% compound interest every year. How much do you get from interest every year? How much do you have in your account after 5 years?

5. SIMPLE INTEREST FORMULAS
I = Prt
ACCUMULATED BALANCE
A = P + I or A = P + Prt
A: accumulated balance

6. Compound Interest Formula
𝐴=𝑃 (1+𝐴𝑃𝑅) 𝑌
A = accumulated balance
P = Principal
APR = annual percentage rate
Y = # of years

7. Example 1
Ryan deposited $2,000 in a saving account at the interest rate of 4% per year. How much simple interest will he earn in 5 years?
A = P + Prt

8. Example 2
Garcia borrowed $4,000 from his cousin Susan at the rate of 8% per annum. He repaid the amount after two years. How much did he repay?
𝐴=𝑃 (1+𝐴𝑃𝑅) 𝑌

9. Example 3
On July 18, 1461, King Edward IV of England borrowed the modern equivalent of $384 from New College of Oxford. The King soon paid back $160, but never repaid the remaining $224. The debt was forgotten for 535 years. Upon its rediscovery in 1996, a New College administrator wrote to the Queen of England asking for repayment with interest. Assuming the interest rate was compounded annually at 4%, what does the Queen of England owe New College of Oxford?
𝐴=𝑃 (1+𝐴𝑃𝑅) 𝑌

10. Example 4
Charlie is investing $10,000 in a CD for 20 years. The CD has an APR of 4.5% and is compounded annually. How much does Charlie have at the end of the 20 years? How much is from interest?
𝐴=𝑃 (1+𝐴𝑃𝑅) 𝑌