23 - The more you compound my account the better.pdf

# 23 - The more you compound my account the better.pdf - Name...

• Test Prep
• 4

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Name: __________________________ Compound interest The more you compound my account the better!!! Simple interest means the institution gives you interest only on the money you put into your account, but compound means you additionally get interest on the interest the institution gives you. The formula below is used to determine the amount in your account if compounded annually. ( ) 1 t o A P r = A = Amount in your account after interest is added. P 0 = Initial principal (money you put into your account at the beginning) r = Annual Percentage Rate (APR) t = Time in years Note: All work on this lab will use accounts that are compounded annually! 1. Calculator review: A. Write the equation and then calculate how much you will have in a savings account after 7 years if you initially deposited \$5000, have an APR of 4%, and made no further deposits? B. Write the equation and then calculate how much a CD would be worth after 4 years if you initially deposited \$9000, have an APR of 6%, and made no further deposits? C. Write the equation and then calculate how much you would have in a stock fund after 10 years if you initially deposited \$8000, got an APR of 9%, and made no further deposits?

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• Fall '13

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