Thurs, 4/15/10 SWBAT…apply exponents

Agenda

1. Workshops: Compound interest & Depreciation

HW: Work on projects

Compound Interest Compound interest is interest earned or paid on both

the initial investment and previously earned interest.

A = the current amount

P = the principal or the initial amount

r = the annual interest rate expressed as a decimal

n = the number of times the interest is compounded each year

t = time in years

nt

n

rPA )1

Compounding Periods

Interest compounded annually occurs once per year

Semi-annually occurs 2 times a year Quarterly occurs 4 times a year Monthly occurs 12 times a year

INVESTMENTS

Laura invested $6,600 at an interest rate of 4.5% compounded monthly. Determine the value of her investment in 4 years?

Answer: About $7,898.97

SALARY

Ms. Keros received a job as a teacher with a starting salary of $47,000. According to her contract, she will receive a 4.5% interest rate every year. How much will Ms. Keros earn in 5 years?

Answer: About $58,570.55

Depreciation/ Exponential Decay

In exponential decay, the original amount decreases by the same percent over a period of time.

y = the final amounta = the initial amountr = interest rate per yeart = time, in years

tray )1(

CARS

Leonardo purchases a car for $18,995. The car depreciates at a rate of 18% annually. After 6 years, Manuel offers to buy the car for $4,500. Should Leonardo sell the car? Explain?

Answer: No, the car is worth about $5,774.61

INVESTMENTS

Jim’s investment of $4,500 has been losing its value at a rate of $2.5% each year. What will his investment be worth in 5 years?

Answer: About $3,964.93