concept #1: calculating interest earned on a deposit\nsavings accounts at a bank or credit union, money…

concept #1: calculating interest earned on a deposit\nsavings accounts at a bank or credit union, money market accounts, and certificates of deposit (cds) are just a few of the places where you can put money and earn interest. for this first concept, well look at how much interest you would earn over a period of time at different interest rates. for example, how much interest would you earn if you placed $1,000 in an interest - bearing account that paid an annual interest rate of 5 percent compounded annually? you would earn $1,000×.05 = $50. another way of looking at this question is to ask how much your deposit would be worth at the end of one year. to find the answer, you would simply multiply by $1,000×(1 +.05) = $1,050. multiplying by 1 gives you the original amount and multiplying by the.05 gives you the interest earned.\nyou will see that this formula is the same one used to calculate a future value:\nfuture value = present value (1 + interest rate)^number of periods\nor\nfv = pv(1 + i)^n\nso, fv = $1,000(1.05)^1 = $1,050\nsince the period in this example is only one year, n = 1. however, this formula will also work for multiple years as we will see in concept #2 that follows.\nmath review\n2,000×.06 =\n3,000×.07 =\n4,000×.08 =\n11,000×.04 =\n28,500×.035 =\n31,000×.065 =\n9,000×1.05 =\n13,000×1.07 =\n1,800×1.09 =\n17,400×1.045 =\n7,200×1.0625 =\n9,150×1.055 =\napply your knowledge\n1. judy put $2,000 in a cd earning 6 percent annually. how much interest will she earn over the year?\n2. phillip deposited $3,400 into a savings account that pays 4 percent annual interest. how much will he have in his account at the end of one year?\n3. tara bought a $5,000 cd that will pay 3.5 percent in annual interest. how much will the cd be worth at the end of the first year?

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