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Math Help - Solving Logarithms Financial math help

  1. #1
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    Solving Logarithms Financial math help

    Hi there,

    Im pretty desperate. I have a test on compound interest and financial math tomorrow and missed a lesson on Logarthims. The teacher apparently went through it quickly and just showed everyone how to solve the problems using their calculator which because i have not even heard of a logarithm before this, i feel completely lost. I have been searching the net but all the problems do not look similar to the ones I have been given to practice on.

    heres an example...

    5000 = 2,500(1.00125)^t

    I understand that logs help to find the exponent and that the 5000 is the amount of money hoping to acquire and 2,500 is the principal amount. What i am confused about is how this relates to the formula a^y = x?????

    Most importantly can someone walk me through the steps of entering this in my calculator???

    Thanks to all for any help!!!!!
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  2. #2
    MHF Contributor
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    Ottawa, Canada
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    Re: Solving Logarithms Financial math help

    Quote Originally Posted by nkuchmak View Post
    5000 = 2,500(1.00125)^t

    I understand that logs help to find the exponent and that the 5000 is the amount of money hoping to acquire and 2,500 is the principal amount. What i am confused about is how this relates to the formula a^y = x?????
    If a^y = x, then y = LOG(x) / LOG(a)

    2,500(1.00125)^t = 5000
    1.00125^t = 5000/2500 = 2

    So t = LOG(2) / LOG(1.00125)
    OK?
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