Simple Interest
Simple InterestSimple Interest: interest earned each year is fixed and DOES NOT accumulate.Suppose you invest $1000 in the bank. You leave the money in the bank for 3 years, and are paid a simple interest rate of 10% per annum. YearInterest EarnedTotal Amount123Write the amount in the bank as a sequence: ____, ____, ____, ____Write an equation for the general form of this sequence: _____________________________Rewrite this equation, letting u1 represent the initial investment and letting f represent the fixed amount of interest earned each year (r% of u1): _______________________Simple Interest FormulaExamples: 7,000 Swiss Francs is invested at 5% p.a. simple interest for 18 years. Calculate the value of this investment at the end of this period.65,000 Yen is invested at a simple interest rate of 3.5% p.a. How much is this investment worth after 5 years?Tabitha started a college fund for her son when he started kindergarten. This investment earned 10% simple annual interest. 13 years later this fund is worth $11,000. How much did Tabitha initially invest in the college fund?You took out a $12000 loan to buy a car. This loan collects simple interest at a rate of 16% p.a. What is the total amount that must be repaid after 8 years?Compound InterestCompound Interest: interest is added to the investment each year (interest is paid on interest)Suppose once again you invest $1000 in the bank for 3 years, but this time you are paid a compound interest rate of 10% p.a. YearInterest EarnedTotal Amount123Write the amount in the bank as a sequence: ____, ____, ____, ____Write an equation for the general form of this sequence: _____________________________Rewrite this equation, letting u1 represent the initial investment and letting r represent the common ratio (1 + interest rate): _______________________Compound Interest FormulaExamples:What will an investment of 3000 GBP at 10% p.a. compound interest amount to after 3 years? What part of this is interest?How much compound interest is earned by investing 20,000 euros at 12% p.a. if the investment is over a 4 year period?Jaime took out a loan with a compound interest rate of 10%. 5 years later, the loan amount has reached $14,641. How much was Jaime’s initial investment? ................
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