Name_________________________________ Date_______________ IB Math Studies Year 1 7-6 Intro to Compound Interest Learning Goal: What is compound interest? How do we compute the interest on an investment? Warm-Up: Let’s say that you deposit $100 into your savings account today. This bank account gains 2% interest every year. If you don’t withdraw any money a. How much money would you have at the end of the first year? b. How much money would you have at the end of the second year? c. In these two years, how much interest (money) did you gain? d. Is the money in the savings account increasing by the same about each year? Interest is the percent of money charged to money borrowed or percent of money earned on an investment. When you put money into a savings account, the bank often pays you interest. That interest is the incentive for you to keep the money in the bank, your account is gaining this interest. When you are saving money … When you take out a loan (or borrow money) to pay for something like a house or car you have to pay interest on that money. When you are borrowing money… Compound Interest When you borrow money or deposit money interest accumulates per year (also called per annum) . This means that the interest gained each year is based off the current amount of money in the account, not the original amount deposited.
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IB Math Studies Year 1 7-6 Intro to Compound Interest...2019/03/07 · When you are borrowing money… Compound Interest When you borrow money or deposit money interest accumulates
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