SECTION 5 5 Compound Interest pp 208 210

SECTION 5 -5 Compound Interest pp. 208 -210

SECTION 5 -5 • • • Click to edit Master text styles Section Objective Second level Figure out: Third level • compound interest Fourth level • amount Fifth level 10/31/2020 Copyright © Glencoe/Mc. Graw-Hill 2 MBA, Section 5 -5, Slide 2 of 14

SECTION 5 -5 • • • Click edit Master text styles Keyto. Words to Know Second level compound interest (p. 208) Third level Interest earned not only on the principal in a Fourth level bank account, but also on the interest earned on Fifth level or interest on interest. the account, 10/31/2020 Copyright © Glencoe/Mc. Graw-Hill 3 MBA, Section 5 -5, Slide 3 of 14

SECTION 5 -5 • • • Click to edit 1 Master text styles Formula Second level Amount = Principal + Interest Third level Fourth level Fifth level 10/31/2020 Copyright © Glencoe/Mc. Graw-Hill 4 MBA, Section 5 -5, Slide 4 of 14

SECTION 5 -5 • • • Click to edit 2 Master text styles Formula Second level Compound Interest = Amount – Original Principal Third level Fourth level Fifth level 10/31/2020 Copyright © Glencoe/Mc. Graw-Hill 5 MBA, Section 5 -5, Slide 5 of 14

SECTION 5 -5 • Click to edit Master text styles • Second level • Third level Understanding the Williams Sisters • p. Fourth level 208 • Fifth level Give an example of compound interest. How does it work? 10/31/2020 Copyright © Glencoe/Mc. Graw-Hill 6 MBA, Section 5 -5, Slide 6 of 14

SECTION 5 -5 • • • Click to edit 1 Master text styles Example Second level Jamal Quillet deposited $1, 800 in a savings Third level account, which earns 6 percent interest that Fourth level is compounded quarterly. He made no deposits Fifth levelor withdrawals. What is the amount in the account at the end of the second quarter? 10/31/2020 Copyright © Glencoe/Mc. Graw-Hill 7 MBA, Section 5 -5, Slide 7 of 14

SECTION 5 -5 • • • Click to edit 1 Master text styles Example Answer Second level Step: Find the amount for each quarter. Third level Fourth level Fifth level 10/31/2020 Copyright © Glencoe/Mc. Graw-Hill 8 MBA, Section 5 -5, Slide 8 of 14

SECTION 5 -5 • • • Click to edit 1 Master text (cont. ) styles Example Answer Second level Third level Fourth level Fifth level 10/31/2020 Copyright © Glencoe/Mc. Graw-Hill 9 MBA, Section 5 -5, Slide 9 of 14

SECTION 5 -5 • • • Click to edit 2 Master text styles Example Second level In Example 1 Jamal Quillet deposited $1, 800 Third level in a savings account that earns 6 percent Fourth interestlevel compounded quarterly. You determined Fifth level that the amount in his account at the end of the second quarter was $1, 854. 41. What is the compound interest? 10/31/2020 Copyright © Glencoe/Mc. Graw-Hill 10 MBA, Section 5 -5, Slide 10 of 14

SECTION 5 -5 • • • Click to edit 2 Master text styles Example Answer Second level Step: Figure out the compound interest. Third level Amount – Original Principal Fourth level $1, 854. 41 – $1, 800. 00 = $54. 41 Fifth level 10/31/2020 Copyright © Glencoe/Mc. Graw-Hill 11 MBA, Section 5 -5, Slide 11 of 14

SECTION 5 -5 • • • Click to edit 1 Master text styles Practice Second level Alison Strauss deposited $2, 500 in a savings Third level account which pays 5¼ percent interest Fourth level quarterly. She made no compounded deposits Fifth levelor withdrawals. a. What was the amount in the account at the end of the second quarter? b. How much is the compound interest? 10/31/2020 Copyright © Glencoe/Mc. Graw-Hill 12 MBA, Section 5 -5, Slide 12 of 14

SECTION 5 -5 • • • Click to edit 1 Master text styles Practice Answer Second level a. $2, 566. 06 Third level b. $66. 06 Fourth level Fifth level 10/31/2020 Copyright © Glencoe/Mc. Graw-Hill 13 MBA, Section 5 -5, Slide 13 of 14

END OF SECTION 5 -5 Compound Interest