Log Application 1 - Compound Interest
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Lesson Summary:
In this lesson, we learn how to use logarithms to solve a compound interest problem. The problem asks us to find out how long it takes for $1,300 invested at a 9% interest rate, compounded monthly, to increase to $2,000. By identifying the known variables and using the compound interest formula, we fill in the numbers and simplify the equation. We then use logarithms to solve for the exponent and find that it takes approximately 4.8 years for the investment to grow to $2,000. Finally, we check our answer by plugging it back into the original equation and verifying that it makes sense.
Lesson Description:
Compound Interest using logarithms.
More free YouTube videos by Julie Harland are organized at http://yourmathgal.com
Questions answered by this video:
- What are some applications of logarithms?
- How do you compute compound interest?
- How do you do compound interest problems?
- What is the formula for compound interest?
- How many years does it take $1,300 invested at 9% interest compound monthly to increase to $2,000?
- How do you solve 2,000 = 1,300(1 + .09/12)^12t for t?
- How do you solve for the exponent in an equation?
- How can you check your solution to a compound interest word problem?
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Staff Review
This lesson shows how to use logarithms to solve a real-world application problem. In this case, a compound interest problem is written, entered into the compound interest formula, and the exponent is solved for using logarithms. This is a great explanation of this concept, which can be confusing. All steps and parts of the problem are explained.
