Presentation on theme: "Compound Interest II Money, where fashion continues."— Presentation transcript:
Compound Interest II Money, where fashion continues
Principal, not Principle Principal is the vocabulary for beginning balance, not Principle.
Review Problem $5000 is deposited in a bank at an annual interest rate of 6%. Find the balance after 7 years if the interest is: Simple interest 5000(1+0.06x7) = $7100 Compounded Monthly 5000(1+0.06/12) 12x7 = $7601.85 Compounded Continuously 5000e 0.06x7 = $7609.81
Solving for Principal Your family needs $15000 for your younger brother’s college tuition in 6 years. If the bank offers an annual interest rate of 8%, compounded quarterly, find the principal your family needs to invest now.
Solving for time You won a lottery of $100,000 and decided to deposit it into a bank account. If the bank offers 7% continuously compounded interest, how long does it take for you to become a millionaire?
Solving for Interest Rate Christian Dior LE 30 handbag costs $4800. You have $3000 now and want to purchase this handbag in 6 years. At what interest rate, compounded semiannually, must you get in order to place this purchase?
Compound Interest If a bank pays an annual interest of 6%, compounded monthly, how many years does it take to double the balance?
Other Applications The population of a certain type of bacteria increases at time t hours is given by the exponential function n(t) = 20e 0.05t. What is the initial amount of bacteria? n(0) = 20e 0 = 20 Find the population of the bacteria after 60 hours. n(60) = 20e 0.05x60 = 402 When does the population reach 1000? n(t) = 20e 0.05t = 1000, t = 78.240 hours