Compound Interest

1
Compound Interest
2
Interest

• Definition A charge for borrowed money generally
  a percentage of the borrowed amount.
• Context A person makes a deposit with a
  financial institution, which promises a certain
  rate of interest per year, paid after specified
  intervals of time.
• This is a growth problem!
• Examples Savings account, loans, credit cards,
  etc.

3
Compound Interest

• Definition Interest charged on both the
  principal amount as well as on the interest
  already earned.

When entering an equation into the calculator do
not forget the parentheses.
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Compound Interest Example

• Find an equation for the following context if the
  input is the number of years
• Fred invests 12,000 in an account that offers
  3.2 annual interest compounded semiannually.

2 times a year
3.2
0.032
.
.
0
.
1
2
Decimal Rate
The initial value
Number of Intervals
5
Compound Interest Example

• Continued
• Fred invests 12,000 in an account that offers
  3.2 annual interest compounded semiannually. If
  there are no withdrawals, how much money is in
  the account after 5 years?

x 5 years