Chapter 4A Notes

# Chapter 4A Notes - Page 1 of 2 Math 1332 College...

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Page 1 of 2 Source: College Mathematics , Rockswold G., Bennett J., and Briggs W. C:/CLASES_COLEGIO/2007/NOTAS/0102/ 02//27 Math 1332 - College Mathematics Chapter 4A Notes The Power of Compounding We are now familiar with the compound interest and continuous compounding interest formulas (sections 5-3). Compound Interest: A = P (1 + r / n) n t Continuous Compounding Interest: A = Pe r t We will look at these exponential models in more detail now, in addition to simple interest, and represent compound interest in a general form . Definitions Principal – (in financial formulas) is the balance upon which interest is paid. Simple Interest – interest paid only on the original principal, not on any interest added at later dates. Compound Interest – interest paid both on the original principal and on all interest that has been added to the original principal. Annual Percentage Rate (APR) – Interest paid once a year without taking into account the compounding of interest within that year. Annual Percentage Yield (APY)

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Chapter 4A Notes - Page 1 of 2 Math 1332 College...

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