The interest compound formula is:

The interest compound formula is:

 

A = P(1+r/n)^nt

 

A is the amount of money at a certain period of time, P is the principal or the amount originally deposited, n is the number of time the interest is compounded per year, r is the interest rate, and t is the number of years.

 

  • Does this equation represent an exponential growth? Explain.
  • What does the derivative of this function when t = 5 represent?
  • Knowing that  lim n infinite 8, (1+1/n)^ = e  how can you relate this information to the compound interest amount compounded at a large number of time and to the continuous interest function? Is this conclusion reasonable?
  • What other application of exponential functions can you locate in practice?

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