compound interest n.
Download
Skip this Video
Loading SlideShow in 5 Seconds..
Compound Interest PowerPoint Presentation
Download Presentation
Compound Interest

Loading in 2 Seconds...

play fullscreen
1 / 7

Compound Interest - PowerPoint PPT Presentation


  • 90 Views
  • Uploaded on

Compound Interest. Lesson 3.5. Agree or Disagree ?. A bank account that pays 12% per year yields the same results as a bank account that pays 1% every month and compounds interest. Nominal vs. Effective Rate. Nominal rate The stated yearly rate "12% compounded monthly" Effective rate

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha
Download Presentation

PowerPoint Slideshow about 'Compound Interest' - gretchen


An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
agree or disagree
Agree or Disagree ?
  • A bank account that pays 12% per year yields the same results as a bank account that pays 1% every month and compounds interest.
nominal vs effective rate
Nominal vs. Effective Rate
  • Nominal rate
    • The stated yearly rate
    • "12% compounded monthly"
  • Effective rate
    • The result of the compounding
    • 12% compounded monthly actually gives a 12.683% return on your investment
compound interest formula
Compound Interest Formula
  • Actually we saw this in the previous lesson
  • Here
    • r = the nominal rate
    • Then is the decimal for the effective rate
periodic vs continuous
Periodic vs. Continuous
  • Note the similarities between periodic compoundingand continuous compounding
periodic vs continuous1
Periodic vs. Continuous
  • The k in the continuous model will always be similaror close to the r value in the periodic compounding model
  • Generally r must be slightly larger because there are "less" compounding periods per year
  • Example
    • Convert B = P e .05t to periodic
    • Convert 7.25% compounded monthly to continuous form
assignment
Assignment
  • Lesson 3.5
  • Page 139
  • 1 – 21 odd