Download Lesson 1 – Simple Interest

SIMPLE & COMPOUND INTEREST
Recall: SIMPLE INTEREST
Simple interest is calculated on the initial value invested
or borrowed (the principal).
Simple interest is calculated using the formulae:
I = Prt and A = P + I
COMPOUND INTEREST
compound interest:
interest calculated at regular periods and added
to the principal for the next period
(Earn interest on the interest!!)
Example 
Wilma bought a $500 GIC for a 3 year term. Compare the growth of her
investment at 3.25% per year simple interest to the same investment at
3.25% per year compounded annually.
Simple Interest:
Compound Interest:
Year
Principal
Interest
(I = Prt)
Amount
(A = P+I)
1
2
3
Unit 5 Lesson 2
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COMPOUND INTEREST:
A = P(1 + i)n
Example 
Determine the value of a $700 investment after 6 years at 5.5% interest.
CONCLUSION
Money grows faster when it is calculated using compound interest.
Compound interest represents an exponential growth.
Simple interest represents a linear growth.
Homework:
p.428
#1, 6 (use table)
#4, 7 (use formula)
Unit 5 Lesson 2
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