This preview shows pages 1–9. Sign up to view the full content.
This preview has intentionally blurred sections. Sign up to view the full version.
View Full DocumentThis preview has intentionally blurred sections. Sign up to view the full version.
View Full DocumentThis preview has intentionally blurred sections. Sign up to view the full version.
View Full DocumentThis preview has intentionally blurred sections. Sign up to view the full version.
View Full Document
Unformatted text preview: Section 5.1: Simple Interest. and Compound interest Deﬁnition: If the principal. P, is invested fer a time period of t at a simple
interest rate of r% (for that period) then the interest earned at the end of
the time period is given by [1: Prt The future. value.A or F of the investment at the end of the period is A=P+I=P{1+rt} : P J Prt'
III—A) Example: Yen invest $500 at an annual simple intemgt rate of 4% fer 6 years.
How much interest did yen earn? ‘What is the balance at the end? 1:5 Fri: a", 3",“9‘
:1 5710613430.): 9,7,, Example: You invest $1000 at a menthlv simEle interest rate of 6.5% forg—
years. How much interest. did you earn? “That. is the balance at the. end? B 2'40”
I: p» (.05.?) (24) S’IS'LO f} 1, [0(1fr‘t3 A": [no HM = 251° Example: You invest $2000 for 8 months smei at the. e116: of this time period
you have earned $400 of interest. “That is the. 31111113.] simple interest rate?
mentth simple interest rate? 5..th Ir—l’rl' 1', PM:
(#012000er a» tamer“) r: 1:.—
L’” c ('1: ‘3 Deﬁnition: Suppose the principal. P1 is invested for 3 years at :1 annual i11 terest. rate of 7% and interest is compounded m times per year. The future
# amount, A or F, is given by A = P{1+i}“ = P (1+%)mf Example: Find the balance of the account. if you invest. $600 for T years
at. a nominal rate of 5% compounded 1")
A} annually. A: :9?) r. 2‘
B} eemiannually. ’05 7 z 7. 78
I}: and H ’7? C) quarterly. 4' 7 p 99 :2: C 87,1“)
8 a {H .1, D) monthly. ' 0" ’2’7 ! z
— 0° ’ — ‘
'DS' 7 Ejdaily. H ; Lw(;.}§—; : {$1311 Example: You want $2000 in an account at. the end of 3 years. If the account
gets a nominal rate of 5.75% compounded quarterly, how much do you start
the account with? AP( m9)“ . 5"
20m) : P( ’4' 3’1' E94 l1 PJnu’.” Examplc: You have thc choice of investing money in one of two different
accounts. The. ﬁrst account. is at Bank A and has a rate of 6.51% compounded
sennannualljr. The second account is at Bank B and has a rate of 6.08%
compounded daily. “Finch account is thc better deal? A {S Deﬁnition: For compound intcrcst, the. offcotivc yield, T'Eff. is given by re“: 'W(”£) "a, e’C‘HG") Example: You invest $2000 in an account that. pays interest compounded
monthly. W'hat interest. rate do you need to have a balance of $5,000 at. the
0nd of 3 years. 'I‘VNI Solver The TVM solver that is built function on the TI—33f34 calculators. If you are llHillg the old Tl83 pram and then per ENTER . oth cna'iac press the and The solect thc Finance application and prcaa
cntcr. Hcrc are the variables that arc used in tho TVM Solver. N: m a: t which is the total nunihcr of periods
{conipoundingﬁl for the life of thc account.
1%: The interest rate per year as a pcrccntagc.
PV: The present. \'allc{.~ata‘t.il]g value} of [I]? account.
FRIT: This is the payment that is math each period.
FV: Tho futurc valur[cnrl valuc] of thr acmunt.
PXY = The numth of ])ﬂ)’l‘ll(‘lll5 pcr roar.
C/Y = The number of colnpoundings pcl‘ ﬁ'car. For thiH claw. P1”? and CIT arc cqual am] PMIT:END BEGIN should
he Hﬂt to END. )' — may”;
V0 0 ...
View
Full
Document
This note was uploaded on 04/04/2012 for the course MATH 141 taught by Professor Jillzarestky during the Fall '08 term at Texas A&M.
 Fall '08
 JillZarestky

Click to edit the document details