Math for Life and Food Service

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Math for Life and Food Service

• Chapter 6 Objectives
• Review chapter 5
• Simple Interest
• Compound Interest

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Simple Interest P x R x T
Interest rates are assumed to be per year.The
rate and the time must be in the same units 2
per year for 11 years6.5 per year for 18
months (convert months to years) 18 months
18/12 ? 1.5 years
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Interest Principal x Rate x Time

• How much simple interest will Jeff have to pay
  on a loan of 4,200 if the rate is 12.75 per
  year and he borrowed the money for 15 months?

Step 1 Principal x Rate x Time 4,200 x
12.75 x 15 months Step 2 Convert 15
months 15/12 ? 1.25 years 4,200 x
0.1275 x 1.25
669.375 ? 669.38 in interest
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Principal (Principal) (Rate) (Time) New

• Brett deposited 750 in a savings account that
  advertised 6.25 interest compounded semiannually
  (twice per year). At the end of six months, the
  bank figured interest on Bretts savings and
  directly deposited it into his account. Calculate
  how much is in his savings?

Principal (Principal x Rate x Time)
New 750 (750 x 0.0625 x 0.5
year) 750 (23.4375)
773.4375 ? 773.44 in savings account
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Principal (Principal) (Rate) (Time) New

• Brett now has 773.44 in his savings account.
  After six more months, the bank once again adds
  interest to Bretts account using his new balance
  as the principal?
• Remember 6.25 interest compounded
  semiannually.

Principal (Principal x Rate x Time)
New 773.44 (773.44 x 0.0625 x 0.5
year) 773.44 (24.17)
797.61 in savings account
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Principal (Principal) (Rate) (Time) New

• So after one year, Brett has 797.61 in his
  savings account. Lets try it one more time
  calculate the amount in his savings account after
  another six months.
• Remember 6.25 interest compounded
  semiannually.

Principal (Principal x Rate x Time)
New 797.61 (24.9253125)
797.61 (797.61 x 0.0625 x 0.5 year)
822.5353125 ?822.54 in savings account
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Compound Interest Paying interest on interest.
A amount p principalr annual
rate n periods per yeart time (in years)
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• Now use the compound interest formula to
  compute
• Brett deposited 750 in a savings account that
  advertised 6.25 interest compounded
  semiannually. Calculate how much is in his
  savings at the end of eighteen months?

A amount p principal (750.00) r rate
(6.25 0.0625) t time (18 months 1.5
year) n periods per year (semiannual 2) ?
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A 750 (1 0.03125) 3
A 750 (1.03125) 3
A 750 (1.096710205)
A 822.5326538 ? 822.53