CK-12-Pre-Calculus Concepts

http://www.ck12.org Chapter 13. Finance

Vocabulary

Principalis the amount initially deposited into the account. Notice the spelling is principal, not principle.
Interestis the conversion of time into money.

Guided Practice

1. How much will a person have at the end of 5 years if they invest $400 at 6% simple interest?


2. How long will it take $3,000 to grow to $4,000 at 4% simple interest?


3. What starting balance grows to $5,000 in 5 years with 10% simple interest?
   Answers:
   1.PV= 400 ,t= 5 ,i= 0. 06 ,FV=?

FV=PV( 1 +t·i)

= 400 ( 1 + 5 · 0. 06 )

= 400 · 1. 30

=$520

2.PV= 3 , 000 ,t=?,i= 0. 04 ,FV= 4 , 000

4 , 000 = 3 , 000 ( 1 +t· 0. 04 )

4

3 =^1 +^0.^04 t

1

3 =^0.^04 t

t= 3 · 01. 04 ≈ 8. 333 years

3.PV=?,FV= 5 , 000 ,t= 5 ,i= 0. 10

FV=PV( 1 +t·i)

5 , 000 =PV( 1 + 5 · 0. 10 )

PV= 15 +,^000. 50 ≈$3, 333. 33

Practice

1. How much will a person have at the end of 8 years if they invest $3,000 at 4.5% simple interest?


2. How much will a person have at the end of 6 years if they invest $2,000 at 3.75% simple interest?


3. How much will a person have at the end of 12 years if they invest $1,500 at 7% simple interest?


4. How much interest will a person earn if they invest $10,000 for 10 years at 5% simple interest?