1. Review: Mini-Quiz Simple Interest
Find the interest earned on a 3-year investment of $5,000 at 4.5% interest.
$675
Akiko is saving a little extra money to pay for her car insurance next year. If she invests $1,000 for 18 months at 4%, how much interest can she earn?
$60
Jim Sherman will invest $3,000 at 8% for 5 years. What is the maturity value of the investment?
$4,200
Tony borrowed $20,000 at 8% and paid $4,800 in interest. What was the length of the loan?
3 years

2. Class Greeting

3. Business Math
Compound Interest

4. Objective: The student will be able to find compound interest by using the compound interest formula.

5. Example
Suppose that you were going to invest $5000 in an IRA earning interest at an annual rate of 5.5%
How would you determine the amount of interest you’ve made on your investment after one year?
How much money would you have in your IRA account?

6. Example (continued)
How much interest would you get after 2 years if you started over with your new balance?
***The bank keeps the extra

7. Example (continued)
How much interest would you get after 2 years if you started over with your new balance?
What about 10 years?
You could continue finding the interest one year at a time or use a formula as a shortcut.

8. Compound Interest Formula
P dollars invested at a rate R, compounded annually has a value of A dollars after n years.
Think of P as the principle and A as the amount of dollars after the interest is paid

9. Example (continued)
What about 10 years?

10. Compound Interest
Notice that the interest in our account was paid at regular intervals, in this case every year, while our money remained in the account. This is called compounding annually or one time per year.

11. Lesson Summary:
Objective: The student will be able to find compound interest by using the compound interest formula.

12. Preview of the Next Lesson:
Objective: The student will be able to find personal income tax by using an income tax chart as a guideline.

13. Mathematical Skills and Processes - HW 11
Homework
Mathematical Skills and Processes - HW 11