# Simple and Compound Interest  This section discusses the concept of interest and how it affects your money. The annual interest rate is an important factor when calculating interest, whether it's simple or compound. The formula for calculating simple interest is I

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## About Simple and Compound Interest

PowerPoint presentation about 'Simple and Compound Interest'. This presentation describes the topic on This section discusses the concept of interest and how it affects your money. The annual interest rate is an important factor when calculating interest, whether it's simple or compound. The formula for calculating simple interest is I. The key topics included in this slideshow are . Download this presentation absolutely free.

## Presentation Transcript

Slide1SIMPLEAND COMPOUND INTEREST Since this section involves what can happen to your money, it should be of INTEREST to you!

Slide2Annual interest rateIMPLE INTEREST      FORMULA Interest paid      Principal (Amount of money invested or borrowed) Time (in years) 100 I  =  PRT

Slide3If you invested \$200.00 in an account that paidsimple interest, find how long you’d need to leave it in at 4% interest to make \$10.00. 10 = (200)(0.04) T 1.25 yrs =  T Typically interest is NOT simple interest but is paid semi- annually (twice a year), quarterly (4 times per year), monthly (12 times per year), or even daily (365 times per year). enter in formula as a decimal I  =  PRT 100

Slide4COMPOUND INTERESTFORMULA amount at the end Principal (amount at start) annual interest rate (as a decimal) time (in years) number of times per year that interest in compounded

Slide5500.08 4 4 (2) Effective rate of interest is the equivalent annual simple rate of interest that would yield the same amount as that made compounding.  This is found by finding the interest made when compounded and subbing that in the simple interest formula and solving for rate. Find the effective rate of interest for the problem above. The interest made was \$85.83.  Use the simple interest formula and solve for  r  to get the effective rate of interest. I  =  Prt       85.83=(500) r (2) r  = .08583 = 8.583% Find the amount that results from \$500 invested at 8% compounded quarterly after a period of 2 years.

Slide6AcknowledgementI wish to thank Shawna Haider from Salt Lake Community College, Utah USA for her hard work in creating this PowerPoint. www.slcc.edu Shawna has kindly given permission for this resource to be downloaded from  www.mathxtc.com  and for it to be modified to suit the Western Australian Mathematics Curriculum. Stephen Corcoran Head of Mathematics St Stephen’s School – Carramar www.ststephens.wa.edu.au