This is a free lesson from our course in Algebra II
In this section you'll learn how to solve exponential growth specifically interest related word problems. You will explore here and build skills on how to
work out the compound interest. Exponential growth is generally applied to word problems such as compound interest problems and population growth problems. To grow exponentially means that the topic being studied is increasing in proportion to what was previously there. For example, money deposited in the bank earns interest that is added to the money previously in the bank.
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(Continued from above)
If P is future sum, C is initial deposit, r is interest rate, n is the number of times per year interest is compounded and t is the number of years for investment, the compound interest is given by P = C(1 + r/n)^{nt},
When interest is compounded yearly (n = 1), then P = C(1 + r)^{t}. Similarly, if interest is compounded continually
(n
), then P = Cert.
E.g. if you invest $200 at 5% simple interest for 10 years, it will end up in a sum of $325.78.
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