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Day 3 Simple vs Compound Interest.notebook April 07, 2014
What is Simple Interest?
Simple Interest is money paid or earned on the ___________.
What is the Simple InterestFormula?
Ex.
What is Principal? The Principal is the ________________________________
You put $500 in a savings account. The account earns 3% simple interest per year. What is the interest after 3 years?
I = Prt
Principal + Interest Earned = New Balance
p.11LT: I can calculate simple and compound interest.
Interest Earned is found by:
New Balance is found by:
You Try: You Try:You borrow $100 from a bank. The bank charges 6% simple interest per year. You plan to pay the bank back after 6 months. Find the interest and total balanced owed.
You put $200 in a savings account. The account earns 4% simple interest per year. What is the interest after 5 years? What is the new balance?
Day 3 Simple vs Compound Interest.notebook April 07, 2014
How do I find the Annual Percentage Rate?
1. Use I = Prt2. Substitute for I, P, and t3. Solve for r.4. Convert to a percentage.
You put $350 in an account. The account earns $17.50 simple interest in 2.5 years. What is the annual interest rate?
Ex.
You Try:You put $1000 in an account. The account earns $100 simple interest in 4 years. What is the annual interest rate?
A bank offers a 2% simple interest rate. How long does it take an account with a principal of $800 to earn $100 interest?
Try this one:
p.12
A typical family in the United States owes about $5,000 in credit card debt. A typical credit card interest rate is 18% to 20% per year. What would you pay in interest for 5 years at 19%? What is your new balance?
Try this one:
Day 3 Simple vs Compound Interest.notebook April 07, 2014
1. Use 2. Substitute for B, r, and t.3. Solve for P.
What is the formula for Compound Interest?
You deposit $1000 in a savings account. The account earns 3% interest compounded annually.
Ex.
p.13
You deposit $2500 in a savings account. The account earns 2% interest compounded annually. (A) What is the balance after 3 years? (B) What is the interest earned?
A) What is the balance after 2 years? B) What is the interest earned?
You try:
What is Compound Interest?
Compound Interest is interest that is calculated on principal AND previously earned interest.
How do I find the Principal?
An account earns 3% interest compounded annually. The balance after 2 years is $10,201. What is the principal?
Ex.
Day 3 Simple vs Compound Interest.notebook April 07, 2014
4%
An account earns 5% interest compounded annually. The only change in the account is interest earned. The balance is $9261.00 after 3 years. What is the principal?
You try: p.14
A business owner wants to invest $10,000 for 10 years. Which account should the business owner choose?
Finally, let's compare simple vs compound interest.
Which account should the business owner choose if the money is being invested for 20 years?
Summary:
A)
B)
Day 3 Simple vs Compound Interest.notebook April 07, 2014
Day 3 Simple vs Compound Interest.notebook April 07, 2014
Day 3 Simple vs Compound Interest.notebook April 07, 2014
IF Box 3
$17.9930% off
Original Price$16.99Sale Price $12.99
Store AStore B
Which store is cheaper?
What is the percent of decrease?
Day 3 Simple vs Compound Interest.notebook April 07, 2014
Day 3 Simple vs Compound Interest.notebook April 07, 2014
Day 3 Simple vs Compound Interest.notebook April 07, 2014
Learning Target:
I can calculate simple and compound interest.
Day 3 Simple vs Compound Interest.notebook April 07, 2014
What is interest?
Interest can be.....extra money that the bank gives you for saving your money at the bank.
Can be a positive thing for you!
So, the more money in the your savings account, and the longer you keep it at the bank, the more money you will get.
You don't need to write this!
Day 3 Simple vs Compound Interest.notebook April 07, 2014
It can also be a negative thing for you!
Interest can be.....extra money that the you are charged because you owe money.
So, the more money you owe to a company and the longer you owe, the more in debt you go .
You don't need to write this!
Day 3 Simple vs Compound Interest.notebook April 07, 2014
What is Simple Interest?
Simple Interest is money paid or earned on the ___________.
What is the Simple InterestFormula?
Ex.
What is Principal? The Principal is the ________________________________
You put $500 in a savings account. The account earns 3% simple interest per year. What is the interest after 3 years?
I = Prt
Principal + Interest Earned = New Balance
p.11LT: I can calculate simple and compound interest.
Interest Earned is found by:
New Balance is found by:
You Try: You Try:You borrow $100 from a bank. The bank charges 6% simple interest per year. You plan to pay the bank back after 6 months. Find the interest and total balanced owed.
You put $200 in a savings account. The account earns 4% simple interest per year. What is the interest after 5 years? What is the new balance?
principal
amount of money borrowed or deposited.
Day 3 Simple vs Compound Interest.notebook April 07, 2014
How do I find the Annual Percentage Rate?
1. Use I = Prt2. Substitute for I, P, and t3. Solve for r.4. Convert to a percentage.
You put $350 in an account. The account earns $17.50 simple interest in 2.5 years. What is the annual interest rate?
Ex.
You Try:You put $1000 in an account. The account earns $100 simple interest in 4 years. What is the annual interest rate?
A bank offers a 2% simple interest rate. How long does it take an account with a principal of $800 to earn $100 interest?
Try this one:
p.12
A typical family in the United States owes about $5,000 in credit card debt. A typical credit card interest rate is 18% to 20% per year. What would you pay in interest for 5 years at 19%? What is your new balance?
Try this one:
Day 3 Simple vs Compound Interest.notebook April 07, 2014
1. Use 2. Substitute for B, r, and t.3. Solve for P.
What is the formula for Compound Interest?
You deposit $1000 in a savings account. The account earns 3% interest compounded annually.
Ex.
p.13
You deposit $2500 in a savings account. The account earns 2% interest compounded annually. (A) What is the balance after 3 years? (B) What is the interest earned?
A) What is the balance after 2 years? B) What is the interest earned?
You try:
What is Compound Interest?
Compound Interest is interest that is calculated on principal AND previously earned interest.
How do I find the Principal?
An account earns 3% interest compounded annually. The balance after 2 years is $10,201. What is the principal?
Ex.
Day 3 Simple vs Compound Interest.notebook April 07, 2014
4%
An account earns 5% interest compounded annually. The only change in the account is interest earned. The balance is $9261.00 after 3 years. What is the principal?
You try: p.14
A business owner wants to invest $10,000 for 10 years. Which account should the business owner choose?
Finally, let's compare simple vs compound interest.
Which account should the business owner choose if the money is being invested for 20 years?
A)
B)
Acct A: B = $15,000 Acct B: B = $14,802.44
Day 3 Simple vs Compound Interest.notebook April 07, 2014
Summary:Simple Interest: I = Prt
B = P(1+ rt)
Compund Interest: B = P(1+r)t
Day 3 Simple vs Compound Interest.notebook April 07, 2014
textbook page
#112P
Show work on own paper.
I will collect pages 116 tomorrow.
Day 3 Simple vs Compound Interest.notebook April 07, 2014
Compound interest is calculated on principal and previously earned interest. Simple interest is calculated only on the principal.
I = $40 and B = $1040
$579.64$593.84$608.33$623.09
$1410.60$1480.24$1552.97$1628.89
B = $688.51I = $88.51
P = $8000
Did not change 4% to a decimal.
B = $2163.20
Day 3 Simple vs Compound Interest.notebook April 07, 2014
P = $10,695.13
P = $1061.60
The balance increases more as n increases.
Interest compounded monthly will earn more interest because the account is making money off of the interest from the previous months.
