1. Compounded and Continuous Interest
U1D6

2. Warm Up

3. Homework

4. What is compounded interest?
Compounded interest is when a bank pays interest on both the principal (the original amount of money) and the interest an account has already earned.

5. Formula

6. Example
If you start a bank account with $10,000 and your bank compounds the interest quarterly at an interest rate of 8%, how much money do you have after 3 years?

7. What is continuous compounded interest?
Continuously compounded interest means that your principal is constantly earning interest and the interest keeps earning on the interest earned!

8. Formula

9. Example
If you invest $1,000 at an annual interest rate of 5% compounded continuously, calculate the final amount you will have in the account after five years.