Objective: calculate simple and compound interest

Find each amount.

1. 6% of $400

2. 4.5% of $700

3. 5.5% of $325

Bellwork

Solve for p.

4. I = prt

5. 3p + 4 = k

principal - money first deposited

interest - money you earn on principal

interest rate -

simple interest - only paid on principal

Simple Interest Formula

I = prt

Suppose you deposit $400 in a savings account. The interest rate is 5% per year.

Find the simple interest earned in six years. Find the total of principal plus interest.

Find the interest earned in three months. Find the total principal plus interest.

Compound interest - when a bank pays interest on the principal and on the interest an account has earned.

You deposit $400 in an account that earns 5% interest compounded annually. What is the balance in your account after 4 years? In your last calculation, round to the nearest cent.

Principal at Beginning of Year Interest BalanceYear 1

Year 2

Year 3

Year 4

Compound-Interest Formula

B = p(1 + r)n

finalbalance

principal

interestrate

number of interest periods

Find the balance on a deposit of $1,000 that earns 6% interest compounded semiannually for 5 years.

Find the balance for each account.Amount deposited: $900, annual interest: 2%, time: 3 years

a) compounded annually

b) compounded semiannually

HW pg. 385 # 1-15 odd