Digits, Grade 7, Volume 1, Homework Helper

9-4: Compound Interest

Part 1

Intro

Simple interest is calculated on the principal. Compound interest is calculated on the balance.

After 0 years When you first make the deposit, no interest is earned. The balance is equal to the principal.

balance = principal

Year 0: principal = balance = $100; interest rate = 2%.

After 1 year After 1 year, compound interest and simple interest are equal.

first year compound interest = simple interest

table with 3 rows and 1 column , row1 column 1 , equals p middle dot r middle dot t , row2 column 1 , equals 100 middle dot 2 percent middle dot 1 , row3 column 1 , equals 2 , end table

A time line of compound interest after 1 year.


End ofPage 322

Table of Contents

Digits, Grade 7, Volume 1, Homework Helper Unit A: Number and Operations Unit B: Expressions, Equations, and Relationships Unit C: Measurement and Geometry Unit D: Proportionality English/Spanish Glossary Formulas Math Symbols Formulas Measures Properties