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r Compound interest formula: A = A0 ( 1 + n )nt A is the new value of the investment A0 is the original amount of the investment r is the annual interest rate, written as a decimal n is the number of times the interest is compounded in a year And t is the length of the investment, in years Steps: 1) Write down the formula 2) Fill in the missing amounts Determine the growth rate (______________ ÷ ____________________) Substitute the values for the original amount, the number of times compounded, and the time (in years) 3) Calculate Sample Problems: Find the value of $3200 invested for 3 years at 6.0% if the interest is compounded a) quarterly b) semi-annually c) monthly Solutions a) A0 = 3200, r = .06, and t = 3. Since the interest is compounded quarterly, n = 4. This gives us b) A0 = 3200, r = .06, and t = 3. Since the interest is compounded semi-annually, n = 2. This gives us c) A0 = 3200, r = .06, and t = 3. Since the interest is compounded monthly, n = 12. r y = C(1 + r)t y = C(1 – r)t A A 0 (1 ) nt n 1. Mr. Stangeland invested $1500 in a fund that earns 4%. How much will this investment be worth in 6 years if the interest is compounded: a) Quarterly b) Monthly 2. The town of Algebraville has an inflation rate of 3½ percent. An item today costs $150. a) What did it cost 3 years ago? (t = ____) b) What will it cost when Mr. Stangeland turns 50? (He is currently 35.) 3. Algebra-man is currently taking medication (prescribed) that keeps his brain from getting too big. The amount of medication in his bloodstream dissipates at a rate of 20% per hour. At 12:30 p.m., there is approximately 726 mg of the medication in his system. a) How much was in his system at 9:15 a.m., when he originally took the medication? (t = ______) b) How much will remain in his system at 3:15 p.m.? (t = _______) 4. The point (3, 2) is on the graph of y = a • 2x . What is the value of the y-coordinate when x = 6. 5. (3xy3)4 6. (ab2c3)–3(a4b3c)4 7. (2m)–5 2 3 3 3 –2 2x 4w 8. 8x 9. 2 10. 2 3y 5y 1 5 6 x y 3 2 11. 16xy 4 BONUS: What is the ones digit of 22007? (Show your steps and/or explain your answer.)

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compound interest, Compound Interest formula, interest rate, how to, future value, present value, simple interest, calculate compound interest, Amount of Money, rate of interest

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posted: | 4/28/2011 |

language: | English |

pages: | 3 |

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