11.3 Compound Interest

• Interest which is compounded on the principal and any accumulated interest is called compound interest.
• A = p(1+r/n)^(nt)
  • A, p, r, t as before
  • n is the number of payments per year.
• Effective annual yield
  • Calculate interest on $1 for 1 year.
• Present Value - how much do I need now to have A in the future
• P = A/(1+r/n)^nt
• Page 627 numbers 7, 9, 11, 13, 15, 19, 25, 31