Transcript Simple and Compound Interest

GOOD MORNING
1. Please have out your weekly homework to
be stamped.
2. Please complete the next section of your
SKILL BUILDER.
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MONDAY
1. You receive $2,500 as a graduation gift and decide to deposit it in the bank at 5% simple
interest for the next 25 years. How much money will you have at the end of that 25 years?
I=
p=
r=
t=
?
2500
0.05
25
I = 2500 x 0.05 x 25
I = 3,125 + 2,500
A = $5,625
2. To buy a laptop computer, Michelle borrowed $2,000 for 3 years at an annual
simple interest rate of 5%. How much money will she end up paying if she
pays the entire loan off at the end of the third year?
I=
p=
r=
t=
?
2000
0.05
3
I = 2000 x 0.05 x 3
I = 300 + 2000
A = $2,300
3. You borrow $30,000 to buy a new car. The simple interest rate is 5 ½ % per
year. Find the interest you will pay after 5 years.
I=
p=
r=
t=
?
30,000
0.055
5
I = 30000 x 0.055 x 5 I = $8,250
CIRCUIT
You have 20 minutes to complete
the CIRCUIT from yesterday. When
you have completed your CIRCUIT,
you must bring it to me to grade.
Thank you!
The difference between simple and
compound interest
Simple Interest - I = Prt
Interest is only earned on the principle amount.
t
A
=
P(1+r)
Compound Interest -
Interest is earned on the principle and the
interest combined.
1. The amount paid to a depositor for keeping their money in a
savings account is called:
A. principle
B. term
C. interest
D. rate
2. The _________ determines how much is paid to the depositor
each year.
A. principle
B. term
C. interest
D. rate
3. The amount of the original investment is called:
A. principle
B. term
C. interest
D. rate
4. Fill-in the appropriate words below:
Simple
a.) __________________ interest is paid on principle
only.
Compound
b.) __________________ interest is paid on both principle
and interest.
5. The formula for simple interest is:
I = Prt
________________________________________
6. The formula for the ending balance on an
account with simple interest is:
A
=
P
+
I
________________________________________
7. The formula for the ending balance on an
account with compound interest is:
A = P(1+r)t
____________________________________
*A =
𝑟 tn
P(1+ )
𝑛
n = the number of compounding periods
TUESDAY
1.
Carly deposited $800 in an account that earns 6% annual compounded semi-annually. Lara deposited $800 in
an account that earns 6% simple interest. How much will each girl have in their account at the end of 10
years if they make so withdrawals or deposits?
𝑟
Carly A = P(1+𝑛)tn
A
B
C
D
Carly: $1432.68 Lara: $1280
Carly: $1444.89 Lara: $1280
Carly: $1444.89 Lara: $1320
Carly: $1432.68 Lara: $1320
A=
0.06 (10)(2)
800(1+ )
2
2. Joseph paid $7812.50 in interest on a loan of $50,000 for a period of 30 months. What was the interest rate?
3. Ashley’s parents invested $15,000 for college in an account earning simple interest. When they withdrew the investment
thirteen years later, they had earned a total of $10,725 in interest. What was the interest rate?
8. In the simple interest formula i = p x r x t
a.) What does the “p” represent?
_________________________
b.) What does the “r” represent?
_________________________
c.) What does the “t” represent?
_________________________
9. Use simple interest to find the ending balance in the
examples below:
a.) $210 invested at 8% for 7 years
I = 210 x 0.08 x 7 = $117.6+ 210 = $327.60
b.) $4000 invested at 3% for 4 years
I = 4000 x 0.03 x 4 = $480 + 4000 = $4,480
c.) $34,000 invested at 4% for 3 years
d.) $2300 invested at 7.5% for 10 years
10. Use compound interest to find the ending balance in the examples
below:
A = P(1+r)t
a.) $1,250 invested at 8% compounded annually for 2 years
A = 1250(1+0.08)2 = $1,458
b.) $650 invested at 7% compounded annually for 5 years
A = 650(1+0.07)5 = $911.66
A=
t
P(1+r)
c.) $10,000 invested at 7.8% compounded
annually for 2 years
d.) $7,500 invested at 6%
compounded annually for 15 years
11. How much interest is earned on a principle
of $646 invested at a simple interest rate of
5% for 10 years?
12. How much interest is earned on a principle
of $646 invested at a compound interest rate
of 5% compounded annually for 10 years?
13. Does the amount of interest earned each year
increase, decrease, or stay the same in a simple
interest account? …in a compound interest account?
Explain your answers.
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