Logarithms 13 - Compound Interest

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Taught by YourMathGal
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Lesson Summary:

In this lesson on logarithms, the focus is on solving word problems using the compound interest formula, where interest is compounded quarterly or continuously. The compound interest formula is used to find the amount of money in a bank account if you deposit a certain amount at an annual interest rate, compounded n times per year for a certain number of years. On the other hand, the formula for interest compounded continuously is used when interest is not compounded at set intervals. By working through examples and using order of operations, the lesson shows the difference in the amount of money in an account when interest is compounded quarterly versus continuously.

Lesson Description:

Solve word problems using the compound interest formula and the formula where interest is compounded continuously. These are not using logs, they are using exponents. .

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Questions answered by this video:
  • What is compound interest and the compound interest formula?
  • How do you solve word problems using the compound interest formula?
  • How do you find the amount of money in an account if $3000 is deposited at 8% interest rate for 5 years if interest is compounded quarterly or continuously?
  • How do you find the amount of money in an account if $6000 is deposited at 6% interest rate for 7 years if interest is compounded twice a year or continuously?
  • What do the letters or variables mean in A = P(1 + r/n)^nt?
  • What do the letters or variables mean in A = Pe^rt?
  • Staff Review

    • Currently 4.0/5 Stars.
    The compound interest formula, A = P(1 + r/n)^nt, is explained with all variables defined. Then, the interest formula where interest is compounded continuously, A = Pe^rt, is explained. Both formulas are then used to solve compound interest problems. All steps and work involved is explained and shown. This is a must-watch for anyone learning about compound interest.