8.

6 Problem
Solving:
Compound
Interests
Simple interest: I=prt

I = interest
p = principal: amount you start with
r = rate of interest
t= time in years
If you invest $3,000 at 5% for one year, how much
will you make for the year?

I = prt
= 3000  0.05  1
= 150
You made $150 for the year.
Compound interest formula:

A = p(1+r)t

A = balance p = principal
r = rate t = time in years
 Find the total amount in your account if you
start with $750 at 7.5% interest for 2.5
years.

A = p(1+r)t
= 750(1+0.075)2.5
= 750(1.075)2.5 (use a calculator here!)
= $898.63
 How much should you invest at 7% to
have $200 after 5 years?

A = p(1+r)t (Plug in what you know.)

200 = p(1.07)5 (get p alone, then use a calculator.)

142.60= p
If you put $100 in the bank at 4%
interest and leave it until you are
60, how much money will you
have?

A = p(1+r)t
= 100(1.04)46 (This assumes you are currently 14)

= 607.48
What about a mutual fund that
pays 10% interest?

A = p(1+r)t
= 100(1.10)46
= 8017.95