Finance and Graphing

1. Emmanuel invests $2000 each in two different banks. Bank A pays 10% simple interest, while Bank B pays 10% compound interest, compounded annually (n = 1).

a) Calculate, then graph the total amount of money for the first 5 years of each investment.

Bank AYears (t) Final

Amount (A)0

1

2

3

4

5

Bank B

I=P ∙r ∙ t A=P+ I

Simple Interest

A¿P ¿

Compound Interest

Years (t) Final Amount (A)

0

1

2

3

4

5

b) Do both investments increase linearly? If no, which one increases linearly? Why?

c) From your table of values, find an equation for the final amount (A) related to the time in years (t) for the investment using simple interest (Bank A).

2. Ahmed borrows $3500 to start a new business at an interest rate of 8% (simple interest).

a) Calculate the total amount of money he owes after each of the first 4 years.

Years (t) Final Amount (A)

0

1

2

3

4

b) Find an equation for the final amount he owes (A) related to the time in years (t) for the loan.

c) Compare the equation from c) to the equation you used in part a) to calculate the final amount. What does the slope represent? What does the y-intercept represent?