241
L21
Applications of Exponential Function and
Logarithms; Logistic Models
Simple Interest Formula:
If a principal of
P
dollars is invested for a period of
t
years at a per annum interest rate
R
, expressed as a
decimal, the interest
I
earned is
I
P R t
=
⋅
⋅
The interest
I
is called the
simple interest
.
Compound interest
is the interest paid on the principal
and previously earned interest.
Compound Interest Formula
:
The amount
A
after
t
years due to a principal
P
invested at an annual interest rate
r
compounded
n
times per year is
1
nt
r
A
P
n
⎛
⎞
=
⋅
+
⎜
⎟
⎝
⎠
Note
:
The more frequently the interest rate is
compounded (the larger
n
), the larger is the amount of
A.
Question
:
Is it true that
A
→ ∞
, as
n
→ ∞
?

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