Day 3 Simple vs Compound Interest.notebook
April 07, 2014
LT: I can calculate simple and compound interest.
p.11
What is Simple Simple Interest is money paid or earned on the ___________.
Interest?
What is Principal? The Principal is the ________________________________
What is the Simple Interest
Formula?
Ex.
You put $500 in a savings account. The account earns 3% simple interest per year. What is the interest after 3 years?
Interest Earned is found by:
New Balance is found by:
I = Prt
Principal + Interest Earned = New Balance
You Try:
You put $200 in a savings account. The account earns 4% simple interest per year. What is the interest after 5 years? What is the new balance?
You Try:
You borrow $100 from a bank. The bank charges 6% simple interest per year. You plan to pay the bank back after 6 months. Find the interest and total balanced owed. Day 3 Simple vs Compound Interest.notebook
How do I find the Annual Percentage Rate?
Ex.
April 07, 2014
1. Use I = Prt
2. Substitute for I, P, and t
3. Solve for r.
4. Convert to a percentage.
p.12
You put $350 in an account. The account earns $17.50 simple interest in 2.5 years. What is the annual interest rate?
You Try:
You put $1000 in an account. The account earns $100 simple interest in 4 years. What is the annual interest rate?
Try this one:
A bank offers a 2% simple interest rate. How long does it take an account with a principal of $800 to earn $100 interest?
Try this one:
A typical family in the United States owes about $5,000 in credit card debt. A typical credit card interest rate is 18% to 20% per year. What would you pay in interest for 5 years at 19%? What is your new balance?
Day 3 Simple vs Compound Interest.notebook
April 07, 2014
What is Compound Interest is interest that is calculated on Compound principal AND previously earned interest.
Interest?
p.13
What is the formula for Compound Interest?
Ex. You deposit $1000 in a savings account. The account earns 3% interest compounded annually. A) What is the balance after 2 years?
B) What is the interest earned?
You try: You deposit $2500 in a savings account. The account earns 2% interest compounded annually. (A) What is the balance after 3 years? (B) What is the interest earned?
How do I 1. Use find the 2. Substitute for B, r, and t.
Principal? 3. Solve for P.
Ex. An account earns 3% interest compounded annually. The balance after 2 years is $10,201. What is the principal?
Day 3 Simple vs Compound Interest.notebook
April 07, 2014
You try:
An account earns 5% interest compounded annually. The only change in the account is interest earned. The balance is $9261.00 after 3 years. What is the principal?
p.14
Finally, let's compare simple vs compound interest.
A) A business owner wants to invest $10,000 for 10 years. Which account should the business owner choose?
4%
B) Which account should the business owner choose if the money is being invested for 20 years?
Summary:
Day 3 Simple vs Compound Interest.notebook
April 07, 2014
Day 3 Simple vs Compound Interest.notebook
April 07, 2014
Day 3 Simple vs Compound Interest.notebook
IF
Box 3
Store A
$17.99
30% off
April 07, 2014
Store B
Original Price$16.99
Sale Price $12.99
What is the percent of decrease?
Which store is cheaper?
Day 3 Simple vs Compound Interest.notebook
April 07, 2014
Day 3 Simple vs Compound Interest.notebook
April 07, 2014
Day 3 Simple vs Compound Interest.notebook
April 07, 2014
Learning Target:
I can calculate simple and compound interest.
Day 3 Simple vs Compound Interest.notebook
What is interest?
April 07, 2014
You do
n
't need to write
Can be a positive thing for you!
Interest can be.....
extra money that the bank gives you for saving your money at the bank. So, the more money in the your savings account, and the longer you keep it at the bank, the more money you will get.
this!
Day 3 Simple vs Compound Interest.notebook
April 07, 2014
You do
n't need
to writ
e this!
It can also be a negative thing for you!
Interest can be.....
extra money that the you are charged because you owe money.
So, the more money you owe to a company and the longer you owe, the more in debt you go .
Day 3 Simple vs Compound Interest.notebook
April 07, 2014
p.11
LT: I can calculate simple and compound interest.
What is Simple Simple Interest is money paid or earned on the ___________.
Interest?
principal
What is amount of money borrowed or deposited.
The Principal is the ________________________________
Principal?
What is the Simple Interest
Formula?
Ex.
You put $500 in a savings account. The account earns 3% simple interest per year. What is the interest after 3 years?
Interest Earned is found by:
New Balance is found by:
I = Prt
Principal + Interest Earned = New Balance
You Try:
You put $200 in a savings account. The account earns 4% simple interest per year. What is the interest after 5 years? What is the new balance?
You Try:
You borrow $100 from a bank. The bank charges 6% simple interest per year. You plan to pay the bank back after 6 months. Find the interest and total balanced owed. Day 3 Simple vs Compound Interest.notebook
How do I find the Annual Percentage Rate?
Ex.
April 07, 2014
1. Use I = Prt
2. Substitute for I, P, and t
3. Solve for r.
4. Convert to a percentage.
p.12
You put $350 in an account. The account earns $17.50 simple interest in 2.5 years. What is the annual interest rate?
You Try:
You put $1000 in an account. The account earns $100 simple interest in 4 years. What is the annual interest rate?
Try this one:
A bank offers a 2% simple interest rate. How long does it take an account with a principal of $800 to earn $100 interest?
Try this one:
A typical family in the United States owes about $5,000 in credit card debt. A typical credit card interest rate is 18% to 20% per year. What would you pay in interest for 5 years at 19%? What is your new balance?
Day 3 Simple vs Compound Interest.notebook
April 07, 2014
What is Compound Interest is interest that is calculated on Compound principal AND previously earned interest.
Interest?
p.13
What is the formula for Compound Interest?
Ex. You deposit $1000 in a savings account. The account earns 3% interest compounded annually. A) What is the balance after 2 years?
B) What is the interest earned?
You try: You deposit $2500 in a savings account. The account earns 2% interest compounded annually. (A) What is the balance after 3 years? (B) What is the interest earned?
How do I 1. Use find the 2. Substitute for B, r, and t.
Principal? 3. Solve for P.
Ex.
An account earns 3% interest compounded annually. The balance after 2 years is $10,201. What is the principal?
Day 3 Simple vs Compound Interest.notebook
April 07, 2014
You try:
An account earns 5% interest compounded annually. The only change in the account is interest earned. The balance is $9261.00 after 3 years. What is the principal?
p.14
Finally, let's compare simple vs compound interest.
A) A business owner wants to invest $10,000 for 10 years. Which account should the business owner choose?
4%
Acct A: B = $15,000 Acct B: B = $14,802.44 B) Which account should the business owner choose if the money is being invested for 20 years?
Day 3 Simple vs Compound Interest.notebook
April 07, 2014
Summary:
Simple Interest: I = Prt
B = P(1+ rt)
Compund Interest: B = P(1+r)t
Day 3 Simple vs Compound Interest.notebook
P
April 07, 2014
textbook page
#1­12
Show work on own paper.
I will collect pages 1­16 tomorrow.
Day 3 Simple vs Compound Interest.notebook
April 07, 2014
Compound interest is calculated on principal and previously earned interest. Simple interest is calculated only on the principal.
I = $40 and B = $1040
$579.64
$1410.60
$593.84
$1480.24
$608.33
$1552.97
$623.09
$1628.89
B = $688.51
I = $88.51
P = $8000
Did not change 4% to a decimal.
B = $2163.20
Day 3 Simple vs Compound Interest.notebook
April 07, 2014
P = $10,695.13
P = $1061.60
The balance increases more as n increases.
Interest compounded monthly will earn more interest because the account is making money off of the interest from the previous months.