1. Daily Compounding pp. 214-216 5-7 SECTION

2. Click to edit Master text styles Second level Third level Fourth level Fifth level 2 SECTION Copyright © Glencoe/McGraw-Hill MBA, Section 5-7, Slide 2 of 21 5-7 daily compounding (p. 214) Interest on an account that is computed each day and added to the account balance. Key Words to Know

3. Click to edit Master text styles Second level Third level Fourth level Fifth level 3 SECTION Copyright © Glencoe/McGraw-Hill MBA, Section 5-7, Slide 3 of 21 5-7 Amount = Original Principal × Amount of $1.00 Formula 1

4. Click to edit Master text styles Second level Third level Fourth level Fifth level 4 SECTION Copyright © Glencoe/McGraw-Hill MBA, Section 5-7, Slide 4 of 21 5-7 Compound Interest = Amount – Original Principal Formula 2

5. Click to edit Master text styles Second level Third level Fourth level Fifth level 5 SECTION Copyright © Glencoe/McGraw-Hill MBA, Section 5-7, Slide 5 of 21 5-7 You deposit $8,000 in an account that pays 5.5 percent interest compounded daily. How much interest will you earn in 31 days? Example 1

6. Click to edit Master text styles Second level Third level Fourth level Fifth level 6 SECTION Copyright © Glencoe/McGraw-Hill MBA, Section 5-7, Slide 6 of 21 5-7 Find the amount of $1.00 for 31 days using the following table. Example 1 Answer: Step 1

7. Click to edit Master text styles Second level Third level Fourth level Fifth level 7 SECTION Copyright © Glencoe/McGraw-Hill MBA, Section 5-7, Slide 7 of 21 5-7 Figure 5.6

8. Click to edit Master text styles Second level Third level Fourth level Fifth level 8 SECTION Copyright © Glencoe/McGraw-Hill MBA, Section 5-7, Slide 8 of 21 5-7 Find the amount. Original Principal × Amount of $1.00 $8,000.00 × 1.00468 = $8,037.44 Example 1 Answer: Step 2

9. Click to edit Master text styles Second level Third level Fourth level Fifth level 9 SECTION Copyright © Glencoe/McGraw-Hill MBA, Section 5-7, Slide 9 of 21 5-7 Find the compound interest. Amount – Original Principal = Compound Interest $8.037.44 – $8,000.00 = $37.44 Example 1 Answer: Step 3

10. Click to edit Master text styles Second level Third level Fourth level Fifth level 10 SECTION Copyright © Glencoe/McGraw-Hill MBA, Section 5-7, Slide 10 of 21 5-7 On May 31, Deloris Zelms deposited $1,000 in a saving account that pays 5.5 percent interest compounded daily. On July 1 how much interest had been earned on the principal in her account? Example 2

11. Click to edit Master text styles Second level Third level Fourth level Fifth level 11 SECTION Copyright © Glencoe/McGraw-Hill MBA, Section 5-7, Slide 11 of 21 5-7 Find the number of days from May 31 to July 1. Use the Elapsed Time Table on page 796 of your textbook. July 1 is day 182. May 31 is day 151. 182 – 151 = 31 days Example 2 Answer: Step 1

12. Click to edit Master text styles Second level Third level Fourth level Fifth level 12 SECTION Copyright © Glencoe/McGraw-Hill MBA, Section 5-7, Slide 12 of 21 5-7 Find the amount of $1.00 for 31 days using the Compound Interest—Amount of $1.00 table on page 796 of your textbook. It is 1.00468. Example 2 Answer: Step 2

13. Click to edit Master text styles Second level Third level Fourth level Fifth level 13 SECTION Copyright © Glencoe/McGraw-Hill MBA, Section 5-7, Slide 13 of 21 5-7 Find the amount. Original Principal × Amount of $1.00 $1,000.00 × 1.00468 = $1,004.68 Example 2 Answer: Step 3

14. Click to edit Master text styles Second level Third level Fourth level Fifth level 14 SECTION Copyright © Glencoe/McGraw-Hill MBA, Section 5-7, Slide 14 of 21 5-7 Find the compound interest. Amount – Original Principal $1,004.48 – $1,000.00 = $4.68 Example 2 Answer: Step 4

15. Click to edit Master text styles Second level Third level Fourth level Fifth level 15 SECTION Copyright © Glencoe/McGraw-Hill MBA, Section 5-7, Slide 15 of 21 5-7 On April 20, Veronica Osborne deposited $1,600 in a savings account. The account pays 5.5 percent interest compounded daily. How much interest will the money earn by May 26? Practice 1

16. Click to edit Master text styles Second level Third level Fourth level Fifth level 16 SECTION Copyright © Glencoe/McGraw-Hill MBA, Section 5-7, Slide 16 of 21 5-7 $8.69 Practice 1 Answer

17. Click to edit Master text styles Second level Third level Fourth level Fifth level 17 SECTION Copyright © Glencoe/McGraw-Hill MBA, Section 5-7, Slide 17 of 21 5-7 Isabella Achacoso has a balance of $20,000 in her savings account on July 3. That same day, she deposits $2,000 in her account. She deposits another $1,000 on July 19. What amount will she have in her account on July 31 if it pays 5.5 percent interest compounded daily? How much is compound interest? Practice 2

18. Click to edit Master text styles Second level Third level Fourth level Fifth level 18 SECTION Copyright © Glencoe/McGraw-Hill MBA, Section 5-7, Slide 18 of 21 5-7 Amount in account on July 31: $23,094.52 Compound interest: $94.52 Practice 2 Answer

19. 215-216: #3-13