PRACTICE 3.3: Applications Exponential Growth/Decay and Compound Interest

Front

What is exponential growth?

Back

Exponential growth occurs when a quantity increases by a consistent percentage over a period of time, leading to rapid increases as time progresses.

Front

What is exponential decay?

Back

Exponential decay occurs when a quantity decreases by a consistent percentage over a period of time, leading to rapid decreases as time progresses.

Front

What does 'semi-annually' mean?

Back

Semi-annually means occurring twice a year.

Front

How do you express exponential growth mathematically?

Back

Exponential growth can be expressed as A = P(1 + r)^t, where A is the amount after time t, P is the principal amount, r is the growth rate, and t is time.

Front

How do you express exponential decay mathematically?

Back

Exponential decay can be expressed as A = P(1 - r)^t, where A is the amount after time t, P is the principal amount, r is the decay rate, and t is time.

Front

What is the formula for compound interest?

Back

The formula for compound interest is A = P(1 + r/n)^(nt), where A is the amount, P is the principal, r is the annual interest rate, n is the number of times interest is compounded per year, and t is the number of years.

Front

What is the principal in finance?

Back

The principal is the initial amount of money that is invested or loaned, before any interest or earnings are added.

Front

What does it mean for an investment to compound monthly?

Back

Compounding monthly means that the interest is calculated and added to the principal every month.

Front

How do you calculate the future value of an investment with compound interest?

Back

To calculate the future value, use the formula A = P(1 + r/n)^(nt) and substitute the values for P, r, n, and t.

Front

What is depreciation in finance?

Back

Depreciation is the reduction in the value of an asset over time, often due to wear and tear.