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3-5 COMPOUND INTEREST FORMULA

3-5 COMPOUND INTEREST FORMULA. OBJECTIVES. Become familiar with the derivation of the compound interest formula. Make computations using the compound interest formula. Compound Interest Formula. B = ending balance p = principal or original balance

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3-5 COMPOUND INTEREST FORMULA

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  1. 3-5COMPOUND INTEREST FORMULA OBJECTIVES Becomefamiliar with the derivation of the compound interest formula. Makecomputations using the compound interest formula.

  2. Compound Interest Formula B = ending balance p = principal or original balance r = interest rate expressed as a decimal n = number of times interest is compounded annually t = number of years

  3. compound interest formula annual percentage rate (APR) annual percentage yield (APY) Key Terms

  4. Example 1 Jose opens a savings account with principal P dollars that pays 5% interest, compounded quarterly. What will his ending balance be after one year?

  5. EXAMPLE 2 Marie deposits $1,650 for three years at 3% interest, compounded daily. What is her ending balance?

  6. EXTEND YOUR UNDERSTANDING Write an algebraic expression for the ending balance after k years of an account that starts with a balance of $2,000 and earns interest at a rate of 3.5%, compounded daily.

  7. EXAMPLE 3 Barbara deposits $3,000 in a one year CD at 4.1% interest, compounded daily. What is the APY to the nearest hundredth of a percent?

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