1. If Carter invests $5300 at 7.2% /a and earned $1200 in interest. If this was a simple interest investment, how long did Carter invest her money? 2. Winnie needs a new washer and dryer and he finds one for $2112. He puts $500 up front but needs to take out a loan for the remaining amount. After a year and a half, he has paid off the loan that totaled to $1879. What was the annual interest rate that Winnie was being charged if it was compound semi-annually? Compounding Interest Equation Compound Interest Amount A = P(1 + i)" A= Amount (at the end) ($) P Principal ($) (starting amount) = effective interest rate (as a decimal) n = number of compound periods = # of years x cp cp = compounding factor Interest I=A-P /= Interest earned ($) thlut Day 22 Present Value in Compound Interest (Solving for the Principal) A PV = (1+i)n PV = Present Value ($) (starting amount) A = Amount ($) (at the end, future value) i = effective interest rate (as a decimal) n = number of compound periods = years x cp cp = compounding factor 7/8
