pre-algebra simple and compound interest suppose you deposit $1,000 in a savings account that earns...
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Pre-Algebra Year 5 : $ = = Year 6 : $ = Year 7 : $ = Year 8 : $ = Simple and Compound Interest You deposit $400 in an account that earns 5% interest compounded annually (once per year). The balance after the first four years is $ What is the balance in your account after another 4 years, a total of 8 years? Round to the nearest cent. Lesson 7-8 After the next four years, for a total of 8 years, the balance is $ Interest Balance Principal at Beginning of Year Additional ExamplesTRANSCRIPT
Pre-Algebra
Simple and Compound Interest
Suppose you deposit $1,000 in a savings account that earns 6% in interest per year.
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.
Additional Examples
Pre-Algebra
Simple and Compound Interest
(continued)
Lesson 7-8
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
Additional Examples
Pre-Algebra
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
Simple and Compound Interest
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.
Lesson 7-8
After the next four years, for a total of 8 years, the balance is $590.98.
Interest BalancePrincipal atBeginning of Year
Additional Examples
Pre-Algebra
Simple and Compound Interest
Find the balance on a deposit of $2,500 that earns 3% interest compounded semiannually for 4 years.
Lesson 7-8
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
Additional Examples