is the compound interest formula—such as would be used to calculate a car loan—an example of a function? If yes, of what type of function is it an example? Why might you identify it with that...

is the compound interest formula—such as would be used to calculate a car loan—an example of a function? 

If yes, of what type of function is it an example? Why might you identify it with that type of function?

Asked on by yissy

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rcmath | High School Teacher | (Level 1) Associate Educator

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If a principal P is invested at an annual interest rate r compounded n times per year, then the balance A in the account after t years is given by:`A=P(1+r/n)^(nt)`

If we are looking at the above relation in term of t then it is indeed a function of A in term of t. Notice that the variable t is the exponent while the base is suppose to represent constants, which means that the function A(t) is an exponential function.

The general form of an exponential function is `f(x)=a.b^x`

where a and b are constant.

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