Thurs, 4/15/10 SWBAT…apply exponents Agenda 1. Workshops: Compound interest & Depreciation HW: Work on projects

Compound Interest n 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

Compounding Periods n n 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 n In exponential decay, the original amount decreases by the same percent over a period of time. y = the final amount a = the initial amount r = interest rate per year t = time, in years

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