7-8 Simple and Compound Interest PRE-ALGEBRA LESSON 7-8 Use your classmates as subjects and estimate these percents. a. About what percent are girls? b

7-8

Simple and Compound InterestSimple and Compound InterestPRE-ALGEBRA LESSON 7-8PRE-ALGEBRA LESSON 7-8

Use your classmates as subjects and estimate these percents.

a. About what percent are girls?

b. About what percent are twins?

Check students’ answers.


(For help, go to Lesson 6-6.)

Find each amount.

1. 6% of $400 2. 55% of $2,000

3. 4.5% of $700 4. 5 % of $32512

Check Skills You’ll Need

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1. 2. 6(400) = 100x 55(2000) = 100x

$24 = x $1,100 = x

3. 4. 4.5(700) = 100x 5.5(325) = 100x

$31.50 = x $17.88 = x

6100

x400=

55100

x2000=

4.5100

x700=

5.5100

x325=

x100=

6(400)100 =

100x100

55(2000)100

100x100

=5.5(325)

100100x100=

4.5(700)100

Solutions

7-8

Simple and Compound InterestSimple and Compound Interest

Suppose you deposit $1,000 in a savings account

that earns 6% per year.

PRE-ALGEBRA LESSON 7-8PRE-ALGEBRA LESSON 7-8

a. Find the interest earned in two years. Find the total of principal plus interest.

The account will earn $120 in two years. The total of principal plus interest will be $1,120.

I = prt Use the simple interest formula.

I = 1,000 • 0.06 • 2 Replace p with 1,000, r with 0.06, and t with 2.

I = 120 Simplify.

total = 1,000 + 120 = 1,120 Find the total.

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(continued)


b. Find the interest earned in six months. Find the total of principal plus interest.

The account will earn $30 in six months. The total of principal plus interest will be $1,030.

I = prt Use the simple interest formula.

I = 1,000 • 0.06 • 0.5 Replace p with 1,000, r with 0.06, and t with 0.5.

I = 30 Simplify.

Total = 1,000 + 30 = 1,030 Find the total.

Write the months as part of a year.t = = = 0.512

612

Quick Check

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Year 5 : $486.20 486.20 • 0.05 = 24.31 486.20 + 24.31 = 510.51

Year 6 : $510.51 510.51 • 0.05 25.53 510.51 + 25.53 = 536.04

Year 7 : $536.04 536.04 • 0.05 26.80 536.04 + 26.80 = 562.84

Year 8 : $562.84 562.84 • 0.05 28.14 562.84 + 28.14 = 590.98


You deposit $400 in an account that earns 5% interest compounded annually (once per year). The balance after the first four years is $486.20. What is the balance in your account after another 4 years, a total of 8 years? Round to the nearest cent.


After the next four years, for a total of 8 years, the balance is $590.98.

Interest BalancePrincipal at

Beginning of Year

Quick Check

7-8


Find the balance on a deposit of $2,500 that earns 3%

interest compounded semiannually for 4 years.


The interest rate r for compounding semiannually is 0.03 ÷ 2, or 0.015.

The number of payment periods n is 4 years 2 interest periods per year, or 8.

The balance is $2,816.23.

B = p(1 + r)n Use the compound interest formula.

B = 2,500(1 + 0.015)8 Replace p with 2,500, r with 0.015, and n with 8.

Use a calculator. Round to the nearest cent.B 2,816.23

Quick Check

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Find the simple interest and the balance.

1. $1,200 at 5.5% for 2 years 2. $2,500 at 8% for 6 months

3. Find the balance on a deposit of $1,200, earning 9.5% interest compounded semiannually for 10 years. $3,035.72

$132; $1,332 $100; $2,600

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7-8 Simple and Compound Interest PRE-ALGEBRA LESSON 7-8 Use your classmates as subjects and estimate these percents. a. About what percent are girls? b