Formula

Example 3

*Step 1. *Identify the variables.

*A* is the ending amount, this is what we are trying to determine.

*P* is the beginning amount, in this case 1500.

*r* is the interest rate written in the form of a decimal, in this case 0.05.

*t* is the time in years, in this case 5 years.

*n* is the number of times compounded per year, in this case it is being compounded yearly and therefore *n* = 1.

***Note: **Since *n* = 1, it will not effect the equation and can be eliminated from the formula. In this case the general form of an exponential function ( *y = ab ^{x}*) is just as effective at solving the problem.

*Step 2. *Substitute the variables into the formula.

*Step 3. *Calculate the formula, you may need a calculator.

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