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lec-10-7

# lec-10-7 - Compound interest Say you invest \$100 and make 7...

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1 ECS10 10/8 Compound interest Say you invest \$100 and make 7% annually After one year you have: \$100 + \$100*7/100 = \$107 You made \$7 00 You made \$7.00 If you leave it invested, and make another 7% the next year, you have: \$107 + \$107*7/100 = \$114.48 You made \$7.49 Compound interest The more you have the more you make e balanc Doubles every seven years. Debt and Payments Example debt: Beginning balance \$1000 Interest rate 13% annually Make a payment of \$300 per year After one year you owe: \$1000+ \$1000*13/100 = \$1130 (\$120 in interest) Then you pay \$300, so you owe \$1120-\$300 = \$870 The next year, you owe: \$870 + \$870*13/100 = 983.10\$ (\$113.10 in interest) Pay another \$300, and get down to \$683.10 New Assignment Given a debt amount, interest rate and monthly payment, figure out how long it takes to pay off the debt, and how much you end up paying in interest. “Compounded monthly” Instead of computing and adding interest every year, do it every month. Use interest rate of (13 / 12)% = 1.0833% every month Is 13% compounded monthly better than 13% compounded annually? Is it exactly the same?

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lec-10-7 - Compound interest Say you invest \$100 and make 7...

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