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**8-6 Compound Interest and Exponential Growth**

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Exponential Growth An exponential model is y=C(a)x, if a>1 the change is exponential growth. If a<1 it is exponential decay. Compound Interest is an example of an exponential growth model. An initial amount, C, is multiplied by a growth factor (1+r) each time period. At each stage, the amount increases by r percent (decimal form).

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**Compound Interest A=P(1+r)t P is the principal**

r is the rate as a decimal t is time in years

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**Suppose $700 is deposited in an account that pays 7**

Suppose $700 is deposited in an account that pays 7.5% annual interest compounded yearly. What is the balance after 8 years?

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How much is deposited in an account that pays 5% interest compounded yearly to have a balance of $ after 10 years?

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Assignment

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Exponential Growth Exponential Decay Example 1 Graph the exponential function given by Solution xy or f(x) 0 1 –1 2 –2 3 1 3 1/3 9 1/9 27.

Exponential Growth Exponential Decay Example 1 Graph the exponential function given by Solution xy or f(x) 0 1 –1 2 –2 3 1 3 1/3 9 1/9 27.

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