Compound Interest

1. Gloria places \($5,000\) in an investment that pays her \(5%\) interest compounded yearly. She would like to know what happens for the first 4 years of her investment.  What if it were compounded quarterly?

1. Compare the amounts and interest earned for the first 4 years for annual, semi-annually and quarterly.  What do you notice?
2. Find an algebraic equation for the interest earned.

2. Returning to the problem in Module 1:

You go to one bank who will give you 5% interest on your $5000 for 5 years. You go to another bank who will give you 5% interest compounded daily for 5 years. Which one should you take and why?

Now that we’ve looked at a special case of exponential growth, let’s learn about a special case of exponential decay.

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Check solutions here.

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