Today's Plan ­ Tuesday, May 10, 2011
~ Present Value note
Today's Learning Goals
~ Practice Simple Interest, Present Value, Future Value
~ Word Problem makeup
By the end of class today students will:
­ Understand the difference between the Present Value & Future Value
­ Be able to solve word problems either way
** Interest Quiz: Thursday **
1
Compounding Interest:
Present Value ­ NinA
~ Present value can be used to go back in time to discover what was invested, or what we should invest to end up with a certain amount
~ the acronym NinA represents this form of the compound interest formula
~ the "P" does not appear in NinA so it is what we are solving for
2
N = # of compounding periods/year (see chart from yesterday)
i = interest rate / N **remember to change interest rate to a decimal**
n = number of years x N
A = final amount of investment
3
There are 2 ways to write the Present Value formula:
P = A (1 + i)n
or
P = A(1 + i)­n
­ both work to find P
­ recall that the answer for P will be $ (round to 2 places)
4
ex. Emilie wants to purchase a $25,000 car in 5 years. How much will she need to invest today at 4.7% interest compounded bi­weekly in order to have the money for the car?
5
ex. Ali needs money for college. On his 13th birthday a $3500 investment was made at 3.8% interest compounded weekly. How much money will he have when he turns 18?
6
ex. Travis has borrowed $500 from his friend who is charging 10% interest. If Travis pays his friend back in 27 months, how much will he owe?
7
Practice:
pg 407 All questions
8
Word Problems Assignment:
Out of 6 Application marks & 6 Communication marks Due at end of class
Create 3 word problems for use in class.
1. Simple Interest
2. Compound Interest ­ Future Value (NPin)
3. Compound Interest ­ Present Value (NinA)
Criteria:
Written problem with enough info to solve.
Solution: Choose formula
9