April 8, 2010Math 132: Foundations of Mathematics 8.1 Homework Solutions 453: 47, 49, 50, 66...

April 8, 2010 Math 132: Foundations of Mathematics

8.1 Homework Solutions453: 47, 49, 50, 6647. Taxes paid = $1008; Total Cost = $17,00849. Discount = $103.20; Sale Price = $756.8050. Discount = $6.60; Sale Price = $9.9066. 30% decrease

Aprili 8, 2010 Math 132: Foundations of Mathematics

Math 132:Math 132:Foundations of MathematicsFoundations of Mathematics

Amy LewisMath Specialist

IU1 Center for STEM Education


8.1 Simple Interest

• Calculate simple interest.• Use the future value formula.• Use the simple interest formula to

calculate loans.


Banking

• How is interest on loans and bank accounts calculated?

• How often is interest paid or accumulated?


Simple Interest

• Interest calculated only on the principal.– The principal is the amount of money that we

deposit or borrow.• Simple Interest = principal x rate x time

I = Prt• The rate is expressed as a decimal when

calculating simple interest.


Calculations

• You deposit $3000 in a savings account, which has a rate of 5%. Find the interest at the end of the first year.

• A student took out a simple interest loan for $2400 for two years at a rate of 7%. What is the interest on the loan?


Future Value for Simple Interest

• Future value is the inclusion of the accumulated interest and the principal for the final value of the account/loan at the end of the term.

• The future value, A, of P dollars at simple interest rate r for t years is given by

A = P(1 + rt)


Future Value

• How does the formula for Future Value relate to the formula for Simple Interest?

• A loan of $2040 has been made at 7.5% for four months. Find the loan’s future value.


Compound Interest

• Interest computed on the original payment as well as on any accumulated interest.

A = P(1 + r)tA = future valueP = Principal or present valuer = ratet = time in years


Compound Interest

• You deposit $1000 in a savings account at a bank that has a rate of 4%.– Find the amount of money in the account

after 5 years subject to compound interest.– Find the amount of interest.– How does this compare to the simple interest

that would have been calculated?


Homework

• 459: 35• 465: 1 & 2• Look over your test and make corrections.

Next Session: Friday, April 9

April 8, 2010Math 132: Foundations of Mathematics 8.1 Homework Solutions 453: 47, 49, 50, 66...

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