Results 1 to 3 of 3

Math Help - Exponential Function

  1. #1
    Member
    Joined
    Mar 2009
    From
    Alberta
    Posts
    173

    Exponential Function

    Hey guys, so I have a question that goes "An investment of $1500 is earning interest at 12%, compounded quarterly (every 3 months). Write an exponential function for the amount, A(t), of the investment after t years.

    Now the answer I came up with was
    <br />
A(t)=1500(1.12)^{4t}<br />

    I came upon 1.12, because that would be a 12% increase on the previous amount, right? But when I went to check my answer, it seems that the correct answer is;

    A(t)=1500(1.03)^{4t}

    I have no idea why they are using 1.03, or where they even got 1.03? Can anyone shed some light on this? Thanks!
    Follow Math Help Forum on Facebook and Google+

  2. #2
    A riddle wrapped in an enigma
    masters's Avatar
    Joined
    Jan 2008
    From
    Big Stone Gap, Virginia
    Posts
    2,551
    Thanks
    12
    Awards
    1
    Quote Originally Posted by Kasper View Post
    Hey guys, so I have a question that goes "An investment of $1500 is earning interest at 12%, compounded quarterly (every 3 months). Write an exponential function for the amount, A(t), of the investment after t years.

    Now the answer I came up with was
    <br />
A(t)=1500(1.12)^{4t}<br />

    I came upon 1.12, because that would be a 12% increase on the previous amount, right? But when I went to check my answer, it seems that the correct answer is;

    A(t)=1500(1.03)^{4t}

    I have no idea why they are using 1.03, or where they even got 1.03? Can anyone shed some light on this? Thanks!
    Hi kasper,

    Your compound interest formula is:

    A=P\left(1+\frac{r}{n}\right)^{nt}

    Where,

    A = Amount accumulated after n years with interest

    P = Principal amount (initial amount)

    r = Annual % rate as a decimal. In your case r = .12

    n = Number of times it's compounded each year. In your case, n = 4 (quarterly)

    t = Number of years

    You just need to divide the rate (.12) by 4 to get .03 and then you arrive at:

    A(t)=1500(1.03)^{4t}
    Follow Math Help Forum on Facebook and Google+

  3. #3
    Member
    Joined
    Mar 2009
    From
    Alberta
    Posts
    173
    Ah, that makes good sense, thanks masters
    Follow Math Help Forum on Facebook and Google+

Similar Math Help Forum Discussions

  1. Replies: 2
    Last Post: April 17th 2012, 10:50 AM
  2. Replies: 11
    Last Post: May 9th 2010, 08:55 AM
  3. Replies: 0
    Last Post: August 31st 2009, 02:02 AM
  4. Replies: 2
    Last Post: March 30th 2008, 02:28 PM
  5. Replies: 3
    Last Post: July 17th 2007, 11:06 AM

Search Tags


/mathhelpforum @mathhelpforum