1. Homework check What is your bank account's interest rate? TD Canada Trust Scotiabank Bank of Montreal Royal Bank ING Direct Spea kers? CIBC

2. Comparing Simple and Compound Interest Re minder: Interest Formula Example 1 Courtney invested $1200 for 2 years in a mutual fund that paid 3.6% interest per year with the interest COMPOUNDED ANNUALLY. a)Determine the final amount of her investment b)Calculate the total interest that Courtney earned on her investment

3. Example 2 A 4 year GIC (Guaranteed Investment Certificate) is available from a Canadian bank, offers a simple interest rate of 5.5% per year. Another institution offers a 4 year GIC with an annual interest rate of 5.5% compounded annually. Compare the amount and the interest earned on $3000 for each investment option using tables and graphs. YearPrincipalInterest EarnedAmount at end of the Year 13000(3000)(0.055)(1)=___________+3000 = _______ 23000(3000)(0.055)(1)=___________ + ________ = _________ 33000(3000)(0.055)(1)=___________ + ________ = _________ 43000(3000)(0.055)(1)=___________ + ________ = _________ Simple Interest YearPrincipalInterest EarnedAmount at end of the Year 13000(3000)(0.055)(1)=___________+3000 = _______ 2(_______)(0.055)(1)=____ __ _____ + ________ = _________ 3(_______)(0.055)(1)=____ __ _____ + ________ = _________ 4(_______)(0.055)(1)=____ __ _____ + ________ = _________ Compound Interest

4. Interest Earned Investment Amount Interest Earned

6. Review Compounding Period Frequencies *Annually - once a year *Monthly - 12 times a year *Semi-annually - twice a year Semi-monthly - 24 times a year (twice a month) * Weekly - 52 times a year *Quarterly - 4 times a year Bi-monthly - 6 times a year (Every 2 months) B i-weekly - 26 times a year (Every 2 weeks)

7. Example 3 A financial institution offers a 1½ year investment with a guaranteed annual interest rate of 2.75% The interest rate is compounded semi- annually. a) Calculate the final amount on an initial investment of $2500. b) Suppose the interest is compounded annually. How would the amount compare with part a?

8. The more frequent the compounding, the more interest earned.

9. Homework Pg. 352 #3,4,6,8,10 Quiz Next Class Simple Interest & Compound Interest