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3.5 Compound Interest Formula

3.5 Compound Interest Formula. Imagine you deposit $10,000 in a five-year cd . The account pays 5.2% interested compounded daily. How much will your $10,000 investment be worth by the end of the 5 years?. Compound Interest Formula. B = ending balance. p = principal. r = interest rate.

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3.5 Compound Interest Formula

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  1. 3.5 Compound Interest Formula

  2. Imagine you deposit $10,000 in a five-year cd. The account pays 5.2% interested compounded daily. How much will your $10,000 investment be worth by the end of the 5 years?

  3. Compound Interest Formula B = ending balance p = principal r = interest rate n = number of compounds per year t = time (in years)

  4. Number of Compounds • Annually • n = 1 • Semiannually • n = 2 • Quarterly • n = 4 • Daily • n = 365 (or 366 in a leap year)

  5. Marie deposits $1,650 for three years at 3% interest, compounded daily. What is her ending balance? p = $1,650 r = 0.03 n = 365 t = 3

  6. Kate deposits $2,350 in an account that earns interest at a rate of 3.1%, compounded monthly. What is her ending balance after 5 years? p = $2,350 r = 0.031 n = 12 t = 5

  7. 3.5 Compound Interest Formula

  8. APR vs. APY • APR • Annual interest rate • APY • Actual rate you earn with compounding interest • To find APY:

  9. Sharon deposits $8,000 in a one year CD at 3.2% interest, compounded daily. What is Sharon’s APY?

  10. Barbara deposits $3,000 in a one year CD at 4.1% interest, compounded daily. What is her APY for the account?

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