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5.2 Po X PreCal X PreCal X PreCal X Financingnc x Polyno x Financ Finance-C( X _ Zoe N X 3 4.3-C X M Inbox x 3 PreCal x & PreCa x PreCa x PreCa x 3 5.3 Po x k Cather X PC Un x 4.20c x C D a docs.google.com/document/d/1FfzTbijTyrx_Ig30toA9mUpPXRTAExUlemOrwb0Al_o/edit#heading=h.gjdgxs Update : SMCPS Bookmarks Zoe Newman - 43-Compound Interest - 9661256.3 Compound Interest * 4 Share File Edit View Insert Format Tools Extensions Help Last edit was made 4 days ago by William Sexton n a $ A 7 100% Normal text Calibri - 11 + B I U A CO P M . = = = 13 X B E EE X Editing EE Compounding Interest Objective: Understand how to calculate compound interest. INTRODUCTION: The principal or balance increases when interest is paid on an account. Compound Interest adds to, and becomes part of the principal. The advantage of compound interest is that when Interest is calculated it is calculated on a principal balance that may already include earned interest. In other words, you are earning interest on previously earned interest. Interest can be compounded annually, semi-annually, quarterly, monthly, or daily. The interest rate given is the annual interest rate, n EXAMPLE: How much interest would $2,000 earn in one year at the rate of 6% compounded semi-annually? What is the new principal at the end of the year? EXAMPLE 1 SOLUTION: Find the interest earned for 1 year by multiplying $2,000.00 principal the principal and the annual interest rate x.06 annual interest rate (6%) as a decimal $120.00 interest for the year Divide yearly interest by the number of periods, $120.00 annual interest semi-annual (2) #2 number of periods (semi-annual) $ 60.00 Interest earned for first period Calculate the new principal at the end of the end $2,000.00 Beginning principal of the first compounding period; beginning of the + $60.00 interest earned for 1" period second compounding periods $2,060.00 new balance at end of 15 period Find the interest earned for 1 year by multiplying $2,060.00 principal + 6month interest the new principal by the annual interest rate x.06 annual interest rate as a decimal 123.60 new interest for the year Divide yearly interest by the number of periods, $123.60 annual interest semi-annual (2) +2 number of periods (semi-annual) 61.80 Interest earned for 2"d period Add the interest $ earned in the 2"d period to the $2,060.00 beginning principal of 2nd period beginning balance of the second period + $ 61.80 interest earned in 2"d period 2,122.80 principal at end of 1 year To find total interest earned at the interest $60.00 interest earned in 1" period earned in 1st period to interest earned in the 2nd +$61.80 interest earned in 2nd period period $121.80 total interest earned New principal at end of 1-year is $$2,122.80 Total interest earned is $121.80 PRACTICE EXERCISES: What is the number of compounding periods 1. Semi-annual 2. Monthly_ 3. Quarterly_ 4. Remi deposited $5,000.00 into a Certificate of Deposit that paid 3.25% interest compounded annually. What was her balance at the end of the year?5.2 Po X PreCal X PreCal X PreCal x Financingnc x Polyno x Financ Finance-C( X _ Zoe N X 3 4.3-C X M Inbox x & PreCa x PreCa x PreCal x & PreCa x 3 5.3 Po x k Cathe X PC Un x 4.20c x C D a docs.google.com/document/d/1FfzTbijTyrx_Ig30toA9mUpPXRTAExUlemOrwb0Al_o/edit#heading=h.gjdgxs Update : SMCPS Bookmarks Zoe Newman - 43-Compound Interest - 9661256.3 Compound Interest * 4 Share File Edit View Insert Format Tools Extensions Help Last edit was made 4 days ago by William Sexton n A 7 100% Normal text Calibri - 11 + B I U A . CO P M . = = = 13 X B . F . E X Editing 5. Aus deposited $10,000 in a savings account that paid 3% compounded semi-annual. a. What is his balance at the end of the 6 months?_ 6. What is his balance at the end of year1? 6. Lisa deposited $2,500.00 in a savings account that paid 2.75% interest compounded quarterly. a. How much interest did she earn in the 1" quarter? b. What is the account ba e at the end of the 1st quarter? C. How much interest did she earn in the 2d quarter?. d. What is the account balance at the end of the 2nd quarter? e. How much interest did she earn in the 3rd quarter? f. What is the account balance at the end of the 3 quarter? g. How much interest did she earn in the 4th quarter? h. What is the account balance at the end of the 4th quarter?_ i. How much interest did she earn for the entire year?_5.2 P X & PreC X & PreC X & PreC X Finar x Finar x & Polyr X & Finar x & Finar x 3 Unit x & Zoe | x 3 4.3-( x _ Zoe| x 3 4.3-( x M Inbo) x & PreC X & PreC X & PreC X & PreC x 3 5.3F x k Cath X & PC U X 4.2(X + C D File | /Users/zoenewman/Downloads/Zoe%20Newman%20-%20Unit%204%20Test%20-%209661256.pdf Update : SMCPS Bookmarks Zoe Newman - Unit 4 Test - 9661256 1 / 2 |- 100% + UNIT 4 ASSESSMENT Select the correct vocabulary definition for the vocabulary word and put the correct letter in the appropriate answer column. Vocabulary Word Vocabulary Definition Answer 1. Tax sheltered annuity a. process of balancing a 1. checkbook 2. Reconcile b. a written request to transfer 2 . money 3. Balance . the amount of money is an account 4. Overdraft Protection d. money earned on principal and accumulated interest 5. Endorse . an account is which money is 2 not taxed until it is withdrawn 6. Compound Interest f. A plan for the bank to pay a 6 . check even though there is not enough money in the account 7. Check g. signing or stamping the back of a check B. Bank Statement . A record of all deposits and 8 . withdrawals during a period of time 9. Lisa opened a savings account at the credit union. The account pays 3% interest compounded monthly. She deposited $8,500. What is the amount of the first month's interest on the account? 10. Bronson deposited 12 twenty-dollar bills, 17 five-dollar bills, and 27 one-dollar bills into his savings account. How much did Bronson deposit into his account? _ 11. Aus's checking account balance is $754.62. He writes checks of $177.65 and $47.33. What is his revised checking account balance?_ 12. Remi contributes $45.75 from each of her paychecks to her IRA. If she contributes this amount for 3-years, and is paid on a monthly basis, how much does she contribute? 13. How many compounding periods are there in an account that compounds semi-monthly? 14. Lisa's employer matches 4% of her 401(k) contributions. Last year she deposited $13,055. What was the amount of the company's contribution?5.2 P X & PreC X & PreC X & PreC x Finar x Finar X & Polyr X Finar x Finar x & Unit x Zoe | X 3 4.3-( X _ Zoe| x 3 4.3-( x M Inbox X & PreC X & PreC X & PreC X & PreC X $ 5.3F x k Cath X & PC U X 4.2(X + C D @ File | /Users/zoenewman/Downloads/Zoe%20Newman%20-%20Unit%204%20Test%20-%209661256.pdf Update : SMCPS Bookmarks Zoe Newman - Unit 4 Test - 9661256 2 / 2 |- 100% +8 15. Jon's bank statement balance was $1,863.90. Since the statement date, he wrote check #621 to Verizon for $285.60 and check #622 to Home Depot for $$315.00. He also deposited $650.00. What is Jon's revised balance? 2