Simple and Compound Interest

Simple and Compound Interest

Let's Talk About Money - Simple and Compound Interest

Today you will

• Know and Apply the Simple Interest Formula

• Know and Apply the Compound Interest Formula

• Know the difference on how to identify which formula to use.

Simple Interest Formula

Do not forget to change the percent to decimal!

• How do you do that?

• Move the decimal two places to the left.

• Example: 3.5% is .035

Multiple Choice

The simple interest formula is I=Prt. The P represents the principle. The principle is ___________________.

• the amount of money borrowed or deposited

• the percent interest for his year

• the amount taxed

• the amount the bank owes you for being a customer at their bank

Multiple Choice

Jerry borrowed $4,000 for 5 years at 6% simple interest rate. How much interest is that?

• $800

• $1,000

• $1,200

• $1,500

Multiple Choice

Anne deposited $500 in an

account that earns 6% simple annual interest.

Shelly deposited $500 in an account that earns 6% annual interest

compounded annually. They leave the

money in the account for 4 years. Which

statement is true about the two investments after 4 years?

• Shelly will have $131.24 more in her account

  than Anne has in her account.

• They will have the same

  amount in their accounts.

• Shelly will have $11.24 more

  in her account than Anne has in her account.

• Anne will have $11.24 more in

  her account than Shelly has in her account.

Compound Interest Formula

Multiple Choice

The difference between the Simple Interest Formula and the Compound interest formula is.....

• The Interest that is accrued over a specific amount of time.

• The number of times the interest is compounded per unit of t.

• The amount deposited initially and deposited each month.

• The rate that is given by a percentage.

Multiple Choice

Garrison

deposited $500 in an account that earns 5% annual interest compounded annually. If he makes no withdrawals or deposits, how

much interest will the account earn after 4 years?

• $600

• $100

• $607.75

• $107.75

Multiple Choice

Heather

invested $8,000 in a 4-year Certificate of Deposit (CD) that pays 4.1% interest

compounded annually. What is the value of the CD at the end

of the 4 years?

• $9,394.92

• $9,312.00

• $1394.00

• $1312.00

Let's Compare....

Multiple Choice

Spongebob

deposited $800 in an account that earns 6% compounded annually. Squidward deposited

$800 in an account that earns 6% simple interest. How much TOTAL will each have

in their account at the end of 10 years if they make no withdrawals or deposits?

• Spongebob: $1432.68 Squidward: $1280

• Spongebob: $1444.89 Squidward: $1280

• Spongebob: $1444.89 Squidward: $1320

• Spongebob: $1432.68 Squidward: $1320

Multiple Choice

Carly

deposited $800 in an account that earns 6% compounded annually. Lara deposited

$800 in an account that earns 6% simple interest. How much will each girl have

in their account at the end of 10 years if they make no withdrawals or deposits?

• Carly: $1432.68 Lara: $1280

• Carly: $1444.89 Lara: $1280

• Carly: $1444.89 Lara: $1320

• Carly: $1432.68 Lara: $1320