1. 2/6/14 “Interest offers” You take out a loan for $20,000 for college. Federal government offers you an interest rate of 4.6%. Bank of America offers you an interest rate of 7.8%. 1.If it takes you 10 years to pay off your loan, how much more will you pay if you take the Bank of America loan? On desk: Simple Interest problems # 1 - 15

2. 1.Federal government offers you an interest rate of 4.6%. I = P = r = t = I = (20,000)(.046)(10) I = $9200 2.Bank of America offers you an interest rate of 7.8%. I = P = r = t = I = (20,000)(.078)(10) I = $15,600 15,600 -9,200 $6,400 more

3. 2/6/14 Econ. Agenda 1.Go over HW problems (simple interest) 2.Compound interest (class notes) 3.Compound interest problems HW: Finish compound interest problems #1-12

4. 1. If Denzel deposits $2,400 in a savings account that earns 3% interest and leaves it there for 15 years, how much interest will he earn and what will his final balance be? I = P = r = t = Formula: Show work:

5. 2. If Gianny takes out a $25,000 loan for college and the federal government charges 2.7% interest, how much interest will Gianny pay if it takes her 12 years to pay back her loan? What is the final total cost of her loan? I = P = r = t = Formula: Show work:

6. 3. If Keyarra deposits $1,200 in a savings account that earns 2% interest and leaves it there for 18 months, how much interest will she earn and what will her final balance be? I = P = r = t = Formula: Show work:

7. 4. If Danny deposits $500 in a savings account that earns 2% interest and leaves it there for 8 years, how much interest will he earn and what will his final balance be? I = P = r = t = Formula: Show work:

8. 5. If Sergio deposits $750 in a savings account that earns 1.9% interest and leaves it there for 6.5 years, how much interest will he earn and what will his final balance be? I = P = r = t = Formula: Show work:

9. 6.I = $2160B = $14,160 7.I = $163.20B = $3563.20 8.I = $14,161B = $31,161 9.I = $91.80B = $1891.80 10.I = $225B = $1725

10. 11. Sammie wants to earn $500 in interest so she’ll have enough to buy a used car. She puts $2000 into an account that earns 2.5% interest. How long will she need to leave her money in the account to earn $500 in interest? I = P = r = t = Formula: Show work:

11. 12. Steph wants to earn enough interest to buy a used car that costs $2,500. She puts $1,500 in an account that earns 3.5% interest. How long will she need to leave her money in the account to earn enough interest to buy the car? I = P = r = t = Formula: Show work:

12. 13. Charis plans to put his graduation money into an account and leave it there for 4 years while he goes to college. He receives $750 in graduation money that he puts it into an account that earns 4.25% interest. How much will be in Charis’ account at the end of four years? I = P = r = t = Formula: Show work:

13. 14. Noura deposits $1,500 in an account that earns 2.5% interest. If she earns $187.50 in interest, how long has she had her money in the account for? I = P = r = t = Formula: Show work:

14. 15. Nathan is trying to decide how much money to save before college. Option #1 is to deposit $1,000 in an account that earns 3% interest and leave it there for 4 years. Option #2 is to deposit $2,500 in the same account. How much more money will Nathan have if he saves enough for Option #2? I = P1 = P2=r = t = Formula: Show work: Option #1Option #2

15. 2/6/14Class notes – compound interest APR: Annual Percentage Rate Interest rate you have to pay on your loan per year Compound interest: interest is added back into the principal, thus earning more interest Example:Principal loan amount = $1,000 APR = 5% Interest accrued in one year = Now you owe = **Compounding interest will charge you interest on TOTAL amount, not just the principal.**

16. Class Notes How do I calculate how much interest I earn/pay per year if interest is compounded? Compound Interest Formula: =P(1 + r) t A Amount of $$ earn/pay at the end of the time period Principal starting $$ amount Rate of Interest Change % to decimal 25% .25 Time in years

17. Class Notes Changing % to decimals 6%= 36%= 0.2% = 2.78% =

18. EXAMPLE Jose deposits $725 into savings account that pays 2.3% interest compounded annually. How much will he have in his account after 8 years? A = P(1 + r) t A = $725(1 +.023) 8 A = $869.65 A = ___ P = r = t =

19. Compound Interest Problems # 1 – 12 Start now, due tomorrow