Fred borrows $40 at 0.8% simple interest per month. When Fred pays the loan back 2 years later, how much interest does Fred pay?

Example 1: If you deposit $4000 into an account paying 6% annual interest compounded quarterly, how  

much money will be in the account after 5 years?  

Plug in the giving information, P = 4000, r = 0.06, n = 4,

and t = 5.

Use the order or operations to simplify the problem. If the  

problem has decimals, keep as many decimals as possible  

until the final step.  

FV = 5387.42  Round your final answer to two decimals places.

After 5 years there will be $5387.42 in the account.

Example 1: If you deposit $4000 into an account paying 6% annual interest compounded quarterly, how  

much money will be in the account after 5 years?  

Plug in the giving information, P = 4000, r = 0.06, n = 4,

and t = 5.

Use the order or operations to simplify the problem. If the  

problem has decimals, keep as many decimals as possible  

until the final step.  

FV = 5387.42  Round your final answer to two decimals places.

After 5 years there will be $5387.42 in the account.Example 2: If you deposit $6500 into an account paying 8% annual interest compounded monthly, how  

much money will be in the account after 7 years?  

Plug in the giving information, P = 6500, r = 0.08, n = 12,

and t = 7.

Use the order or operations to simplify the problem. If the  

problem has decimals, keep as many decimals as possible  

until the final step.  

FV = 11358.24  Round your final answer to two decimals places.

After 7 years there will be $11358.24 in the account.

Example 3: How much money would you need to deposit today at 9% annual interest compounded monthly  

to have $12000 in the account after 6 years?  

Plug in the giving information, FV = 12000, r = 0.09, n =  

12, and t = 6.

Use the order or operations to simplify the problem. If the  

problem has decimals, keep as many decimals as possible  

until the final step.  

P = 7007.08  Divide and round your final answer to two decimals

places.

You would need to deposit $7007.08 to have $12000 in 6 years.

In the last 3 examples we solved for either FV or P and when solving for FV or P is mostly a calculator

exercise. Be careful not to try and type too much into the calculator in one step and let the calculator

store as many decimals as possible. Do not round off too soon because your answer may be slightly off

and when dealing with money people want every cent they deserve.

In the next 3 examples we will be solving for time, t. When solving for time, we will need to solve  

exponential equations with different bases. Remember that to solve exponential equations with  

different bases we will need to take the common logarithm or natural logarithm of each side. Taking  

the logarithm of each side will allow us to use Property 5 and rewrite the problem as a multiplication  

problem. Once the problem is rewritten as a multiplication problem we should be able to solve the  

problem.

12(7)  0.08 FV 6500 1

12

Ê ˆ = + Á ˜ Ë ¯

84 FV 6500(1.00666666)

FV 6500(1.747422051)

=

=

12(6)  0.09

12000 P 1

12

Ê ˆ = + Á ˜ Ë ¯

72 12000 P(1.0075)

12000 P(1.712552707)

Step-by-step explanation:

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step-by-step explanation:

step-by-step explanation:

you divide the denominator by the numerator on both sides and if the quotients are equal then the fractions are equivalent