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Investment and Compound interest

Explore the concepts of investment and compound interest using Tanisha's scenario. If she invests $100 at an 8% annual interest rate compounded monthly, we’ll calculate how long it takes for her investment to grow to $150. Additionally, we will examine the time required if interest is compounded continuously. Learn the important formulas: for monthly compounding, ( A = P(1 + r/n)^{nt} ), and for continuous compounding, ( A = Pe^{rt} ). This analysis provides insights into the power of compounding in finance.

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Investment and Compound interest

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  1. Investment and Compound interest

  2. a) If Tanisha has $ 100 to invest at 8% per annum compounded monthly, how long will it be before she has 150? b) If the compounding is continuous, how long will it be?

  3. INVEST : In finance, an investment is a monetary asset purchased with the idea that the asset will provide income in the future or appreciate and be sold at a higher price. COMPOUNDING :The ability of an asset to generate earnings that are then reinvested and generate their own earnings CONTINUOUS COMPOUNDING :the process of earning interest on top of interest. The interest is earned constantly, and immediately begins earning interest on itself

  4. NOTE • 100 dollars to invest • At a rate of 8% • 100 at 8% = 108 ------ 1st month • 108 X 0.08 = 8.64 + 108 =116.64 ----total on 2nd month • How long before she has 150?

  5. FORMULAS TO USE • When the interest is compounded n times a year: A = P ( 1 + r/n )nt • Continuous Compounding: A = Pert P = principal (initial amount you borrow or invest) r = annual interest rate (given in percentage use it as a decimal) t = number of years A = amount accumulated after time t

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