PSCC - Compound Interest Lesson

Compound Interest

Calculating Compound Interest

In Your Notebook: Watch the following video and take down important notes, such as formulas. Pause the video at times to attempt the practice examples on your own before viewing the solutions!

A= P (1 + r/n) nt (superscript)

A = Total Amount

P = Principal Amount

r = interest rate

n = number of times compound annually

t = time in years

 

Compound interest can be compounded annually or it can be compounded a few times a year such as quarterly, or monthly.

Take a look at the difference in the following equations for an account with a principal value of $50.00 and a 3% interest rate after 5 years. 

Compounded Annually A = 50(1 + 0.03)5 superscript A=$57.96 Compounded Quarterly A=50(1+0.03/4_4*5 superscript A=$58.06 Compounded Monthly A=50(1+0.03/12)12*5 superscript A=$58.08

Using the Compound Interest Formula

It's important to know where to put each value into the formula to determine compound interest. Read the problem and then drag the values to their correct placement in the formula. Not all of the values will be used. Click on the checkmark under the activity to check your answers.

 

Simple and Compound Interest Practice

Practice: Determine the missing values in the activity. Click on the check in the bottom corner to move forward.

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