1. SECTION
5-6
Compound Interest Tables pp

2. Section Objective
Find:
compound interest using tables

3. Formula 1
Amount = Original Principal × Amount of $1.00

4. Formula 2
Compound Interest = Amount – Original Principal

5. Understanding the Williams Sisters
p. 211
In your own words, how do you read a chart in order to find the information you need?

6. Example 1
State Bank pays 6 percent interest compounded quarterly on regular savings accounts. You deposited $3,000 for 2 years. You made no deposits or withdrawals.
How much interest did you earn in 2 years?
(Note: Use the Compound table on page 797 of your textbook to solve this problem.)

7. Example 1 Answer: Step 1 Find the total interest periods.
Periods per Year × Number of Years
4 quarters per year × 2 years = 8 periods

8. Example 1 Answer: Step 2 Find the interest rate per period.
Periods per Year × Number of Years
Annual Rate ÷ Number of Periods per Year
6% ÷ 4 = 1.5%

9. Example 1 Answer: Step 3
Find the amount for 8 periods at 1.5 percent per period using the Compound Interest—Amount of $1.00 table on page 797 of your textbook.
It is

10. Example 1 Answer: Step 4 Find the amount.
Original Principal × Amount of $1.00
$3, × = $3,379.47

11. Example 1 Answer: Step 5 Find the compound interest.
Amount – Original Principal
$3, – $3, = $379.47

12. Example 2
Juan Lopez opens an account and deposits $4, The account pays 6 percent annual interest and compounds quarterly. Six months later he deposits $2,000.
How much will he have in the account in 1½ years if he continues to pay 6 percent interest compounded quarterly?

13. Example 2 Answer: Step 1
Find the total interest periods for first 6 months.
Periods per Year × Number of Years
4 quarters per year × ½ year = 2 periods

14. Example 2 Answer: Step 2 Find the interest rate per period.
Annual Rate ÷ Number of Periods per Year
6% ÷ 4 = 1.5%

15. Example 2 Answer: Step 3
Find the amount of $1.00 for 2 periods at 1.5 percent per period using the Compound Interest—Amount of $1.00 table on page 797.
It is

16. Example 2 Answer: Step 4 Find the amount for 6 months.
Original Principal × Amount of $1.00
$4, × = $4, (new principal)

17. Example 2 Answer: Step 5 Find the amount for 1.5 years.
Periods per Year × Number of Years
4 quarters per year × 1.5 years = 6 periods

18. Example 2 Answer: Step 6
Find the amount of $1.00 for 6 periods at 1.5 percent per paid using the Compound Interest—Amount of $1.00 table on page 797.
It is

19. Example 2 Answer: Step 7 Find the amount for 1.5 years.
New Principal × Amount of $1.00
($4, $2,000.00) × =
$6, × = $7,120.33

20. Practice 1
$8,240 invested at 5.75 percent compounded semiannually for 3 years.
No additional deposits or withdrawals.
Find the amount.

21. Practice 1 Answer
$9,767.53

22. Practice 2
$1,900 invested at 6.25 percent compounded semiannually for 5 years.
No additional deposits or withdrawals.
Find the amount.
How much interest did the money earn in 5 years?

23. Practice 2 Answer
$1,900 invested at 6.25 percent compounded semiannually for 5 years: $2,584.61
Interest earned in 5 years: $684.61

24. END OF SECTION
5-6
Compound Interest Tables