1 / 10

Applications of Exponential Function - Compound Interest

Applications of Exponential Function - Compound Interest. One of the applications of the exponential function is compound interest. The formula is given by:. t = time in years

quintana
Download Presentation

Applications of Exponential Function - Compound Interest

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Applications of Exponential Function - Compound Interest • One of the applications of the exponential function is compound interest. The formula is given by: t = time in years A(t) = amount after t years P = Principal r = rate (as a decimal) n = number of compoundings in a year

  2. Applications of Exponential Function - Compound Interest • Example 1: Find the amount in an account after 4 years, if the initial investment was $5000, at a rate of 4.5%, compounded monthly. t = 4, P = 5000, r = .045, and n =12

  3. Applications of Exponential Function - Compound Interest • Entering the expression into a calculator ... yields an amount of $5984.07 in the account after 4 years.

  4. Applications of Exponential Function - Compound Interest • Example 2: Find the rate of an account with an initial investment of $10,000 that will yield approximately $22,477.37 after 12 years, compounded daily. t = 12, A(12) = 22477.37, P = 10,000, and n = 360. (Banking uses 360 rather than 365.)

  5. Applications of Exponential Function - Compound Interest • Divide by 10000 ...

  6. Applications of Exponential Function - Compound Interest • Raise both sides to a power of the reciprocal of the exponent ... • Note: by pressing the  symbol, the calculator automatically supplies • ANS^.

  7. Applications of Exponential Function - Compound Interest • Subtract 1 and multiply by 360 to find ...

  8. Applications of Exponential Function - Compound Interest • In the formula for compound interest, the letter n represents the number of compounding periods in one year. As the number of compounding periods increase without bound, it is said that the compounding is “continuous.” The formula for continuous compounding is given by ... where e = 2.71828 ...

  9. Applications of Exponential Function - Compound Interest • Example 3: Find the principal that must be invested now at 5% with continuous compounding in order to have $10,000 in 7 years. • The amount to be invested is $7046.88

  10. Applications of Exponential Function - Compound Interest END OF PRESENTATION Click to rerun the slideshow.

More Related