8-6 Compound Interest and Exponential Growth

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Presentation transcript:

8-6 Compound Interest and Exponential Growth

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).

Compound Interest A=P(1+r)t P is the principal r is the rate as a decimal t is time in years

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?

How much is deposited in an account that pays 5% interest compounded yearly to have a balance of $1628.89 after 10 years?

Assignment