7.2 Compound Interest and Exponential Growth . ©2001 by R. Villar All Rights Reserved. Compound Interest and Exponential Growth. A is the balance in the account after t years P is the principal (amount deposited) N is the number of compounding periods per year r is the interest rate.
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.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.
©2001 by R. Villar
All Rights Reserved
Ais the balance in the account after t years
Pis the principal (amount deposited)
Nis the number of compounding periods per year
ris the interest rate
Simple Interest: the amount paid or earned for the use of money for a unit of time.
Compound Interest: Interest paid on the original principal and on interest that becomes part of the account.
Compound Interest Formula:
A ≈ $16,440
This is an example of exponential growth. Let’s look at the graph of this problem which will demonstrate exponential growth...
Balance (1000 dollars)
0 2 4 6 8 10
Notice that this quantity is
greater than 1.
If it was less than 1, the
graph would reflect
Exponential Growth and Decay Model y = Cax
Let a and C be real numbers, with C > 0 ,
If a < 1, the model
is exponential decay
If a > 1, the model
is exponential growth