1. 3.5 Interest Problems

2. Simple Interest
• Simple Interest means interest is only
paid/charged to your account once per year.
A
P (1
r)
t
• A = the balance (or ending amount) after
interest is added
• P = the principle (or beginning amount)
• r = the interest rate earned/charged per year,
written as a decimal
• t = the term or time (the number of years)

3. Writing Functions
• Write a function definition for each situation:
• Principle = $158, interest rate = 3.9%
• Sara opens an account with $3210 and
earns 8% annually.

4. You Try!
• Write a function definition for each:
• Principle = $1250, interest rate = 12%
• Joe earns 2 ½ % on an initial amount of
$79.30.

5. Identifying Variables
• Identify any of the variables A, P, r, t in the
following situations:
• A = 1468(1 + 0.05)t
• 3800 = P(1.0425)5

6. You Try!
• Identify A, P, r, t :
• A = 250(1 + 0.03)t
• 2100 = P(1.123)10

7. Solving Simple Interest Problems
1. List parameters: A, P, r, t
2. Write function
3. Identify what to solve for, then solve
Example 1:
• George took out a loan for $7200, and the
bank is charging simple interest at a rate of
3.25%. How much will he owe at the end of
three years?

8. Example 2
• After 8 years, Fred owes $10000 on a loan
for which he is charged 12.5% interest.
What was his original debt?

9. You Try!
• Tom has $1500 in his account after
earning 3% interest for 7 years. How
much did he originally invest?

10. Compound Interest
• Compound Interest means interest is
added multiple times per year.
A
P 1
r
n
nt
• A = the balance (or ending amount)
• P = the principle (or beginning amount)
• r = the interest rate, written as a decimal
• n = number of times per year interest is
compounded
• t = the term (# of years)

11. Compounding Vocab
• Annually
• Semi-annually
• Quarterly
• Monthly
• Weekly
• Daily
n=1
n=2
n=4
n = 12
n = 52
n = 365

12. Example 1
• You deposit $300 in an account that pays 5%
annual interest. Find the balance after 12
years if the interest is compounded:
• Quarterly?
A=
• Monthly?
• You Try!
• Weekly?
P=
r=
n=
t=

13. Example 2
• Write a function definition for this situation:
• Taylor wants to have $10,000 after five
years with a bank account earning 6.8%
interest compounded semi-annually.
•A=
•P=
•r=
•n=
•t=

14. You Try!
• Write a function definition for this situation:
• Desmond invests $8,000 for 4 years in a
bank account earning 5 ¼ % interest
compounded monthly.
•A=
•P=
•r=
•n=
•t=

15. Example 3
• You want to have $23,000 after 4 years to
buy a car.
• Find the amount you should deposit now if
the account pays 5.9% annual interest
compounded quarterly.
•A=
•P=
•r=
•n=
•t=

16. You Try!
• New parents want to have $50,000 after 18
years for their child’s college.
• Find the amount they should deposit now if
the account pays 6.8% annual interest
compounded monthly.
•A=
•P=
•r=
•n=
•t=