Formula

One very important application of exponential functions is compound interest. Below is the formula:

CompoundInterest

A is the ending amount

P is the beginning amount (or "principal")

r is the interest rate (expressed as a decimal)

n is the number of times the loan is compounded in one year

t is the total number of years

*Note: The formula is set up this way because interest rates are generally reported as annual interest rates.

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