1. 3.5 Compound Interest Formula

2. Imagine you deposit $10,000 in a five-year cd. The account pays 5
Imagine you deposit $10,000 in a five-year cd. The account pays 5.2% interested compounded daily. How much will your $10,000 investment be worth by the end of the 5 years?

3. Compound Interest Formula
B = ending balance
p = principal
r = interest rate
n = number of compounds per year
t = time (in years)

4. Number of Compounds Annually Semiannually Quarterly Daily n = 1 n = 2
n = 365 (or 366 in a leap year)

5. Marie deposits $1,650 for three years at 3% interest, compounded daily
Marie deposits $1,650 for three years at 3% interest, compounded daily. What is her ending balance?
p = $1,650
r = 0.03
n = 365
t = 3

6. Kate deposits $2,350 in an account that earns interest at a rate of 3
Kate deposits $2,350 in an account that earns interest at a rate of 3.1%, compounded monthly. What is her ending balance after 5 years?
p = $2,350
r = 0.031
n = 12
t = 5

7. 3.5 Compound Interest Formula

8. APR vs. APY APR APY Annual interest rate
Actual rate you earn with compounding interest
To find APY:

9. Sharon deposits $8,000 in a one year CD at 3
Sharon deposits $8,000 in a one year CD at 3.2% interest, compounded daily. What is Sharon’s APY?

10. Barbara deposits $3,000 in a one year CD at 4
Barbara deposits $3,000 in a one year CD at 4.1% interest, compounded daily. What is her APY for the account?