Grades 6, 7 and 8 - Math - Middle School - Consumer Math (Calculating Compound Interest to the Whole Dollar) — Flashcards | Middle School | FatSkills

Grades 6, 7 and 8 - Math - Middle School - Consumer Math (Calculating Compound Interest to the Whole Dollar) — Flashcards

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There are two basic forms of interest - simple interest and compound interest.  

The formula to calculate simple interest is I = PRT (interest equals principal, interest rate and time).  In essence, when you receive simple interest you only earn or pay interest on the principal balance.  

With compound interest you not only earn interest on the principal balance but you also earn interest on the interest earnings.  In order to calculate compound interest we have a new formula to follow.  It is: A = P(1 + r)t. 

A = The amount of money (including the accrued interest) after __ years/months or the compound amount
P = The principal saved or owed

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Amanda has $75.00 in the bank which is earning 8% interest, compounded annually. If she does not touch this account, how much compound interest will she earn in 1 year and what will be the new amount of her bank account?
Compound Interest Earned: $6.00; Amount in Savings: $81.00
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