1 / 16

Simple & Compound Interest

Simple & Compound Interest. Simple & Compound Interest. Objective : 7.1.01 Develop and use ratios, proportions, and percents to solve problems Essential Question : How can I use percents to calculate simple and compound interest?. Simple & Compound Interest. Vocabulary :

lecea
Download Presentation

Simple & Compound Interest

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. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. Simple & Compound Interest

  2. Simple & Compound Interest • Objective: • 7.1.01 Develop and use ratios, proportions, and percents to solve problems • Essential Question: • How can I use percents to calculate simple and compound interest?

  3. Simple & Compound Interest Vocabulary: • Interest:an specified amount of money paid or earned for the use of money. • Principal:the original amount of money borrowed or deposited. • Rate:the interest percentage. • Time:the period of time for which an amount of money is invested or borrowed. • Simple Interest:an interest calculation that is calculated only on the principal. • Compound Interest:an interest calculation that is calculated using the principal and any interest remaining in an account.

  4. Simple & Compound Interest Real World Example: Simon is 12 years old and has decided that he wants to buy a car when he turns 16. He has some money and thinks if he puts it in the bank for the next four years he will get enough interest to buy a car. If he invests $3000 and receives 4% simple interest over the next four years, how much will he have to spend on a new car? I = Prt I = (3000)(0.04)(4) I = $480 Simon will have a total of $3,480 to spend on a car when he turns 16

  5. Simple & Compound Interest Simple Interest Formula I = Prt Time (in years) Interest Rate Principal

  6. Simple & Compound Interest Compound Interest Formula B = P(1 + )nt r n Time (in years) Balance Rate Principal

  7. Simple & Compound Interest Example 1:Finding Simple Interest Find the simple interest for $4,000 invested for 4 years at an annual interest rate of 4%. I = Prt I = ? I = (4000)(0.04)(4) P = 4,000 I = $640 r = 4% = 0.04 $4,000 + $640 t = 4 years $4,640.00

  8. Simple & Compound Interest Example 2:Finding Compound Interest If you deposit $4,000 in an account that pays 4% compounded annually what is your balance after 4 years. B = p(1 + r)t B = ? B = 4000(1 + 0.04)4 p = 4,000 B = $4679.43 r = 4% = 0.04 t = 4 years $4,679.43

  9. Simple & Compound Interest Example 3:Finding Simple Interest Find the simple interest for $2,500 invested for 4½ years at an interest rate of 4.5%. I = Prt I = ? I = (2500)(0.045)(4.5) P = 2,500 I = $506.25 r = 4.5% = 0.045 $2,500 + $506.25 t = 4.5 $3,006.25

  10. Simple & Compound Interest Example 4:Finding Simple Interest Find the simple interest for $80 invested for 6 months earning 6% simple interest. I = Prt I = ? I = (80)(0.06)(6/12) P = 80 I = $2.40 r = 6% = 0.06 $80.00 + $2.40 t = • 6/12 = 0.5 $82.40

  11. Simple & Compound Interest Example 5:Using Simple Interest to Find Time If you invest $8,000 and receive 9% simple interest, how long would it take to earn $5,040 in interest. I = Prt I = 5,040 5040 = (8000)(0.09)(t) P = 8,000 5040 = 720t r = 9% = 0.09 720 720 t = ? t = 7 years

  12. Simple & Compound Interest Example 6:Using Simple Interest to Find Rate If you invest $8,000 and receive $5040 in simple interest after 7years, what was the interest rate. I = Prt I = 5,040 5040 = (8000)(r)(7) P = 8,000 5040 = 56000r r = ? 56000 56000 t = 7 r = 0.09

  13. Simple & Compound Interest When Calculating Interest: Always Remember… First make sure you are using the correct formula…is it simple interest or compound interest? • Make the correct substitutions…p is principal, r is interest rate, t is time in years, and B is balance. • Solve for the unknown. • Reread the question and calculate your answer.

  14. Simple & Compound Interest Independent Practice: Find the interest for each example below: 1. $800, 5 years, 5% interest 2. $1,500, 6½ years, 8% interest 3. $450, 7 years, 11.75% interest = $200.00 = $780.00 = $370.13

  15. Simple & Compound Interest Independent Practice: Find the interest for each example below: 1. $800, 5 years, 5% interest 2. $1,500, 6½ years, 8% interest 3. $450, 7 years, 11.75% interest = $200.00 = $780.00 = $370.13

  16. Simple & Compound Interest HOMEWORK

More Related