Money deposited in a bank account earns interest on the initial amount deposited as well as any interest earned as time passes. This compound interest can be described by the expression [math]P(1 + r)^n[/math], where [math]P[/math] represents the initial amount deposited, [math]r[/math] represents the interest rate, [math]n[/math] represents the number of months that pass. How does a change in each variable affect the value of the expression?
[list=1] [*]Refer to the given expression: [math]P(1 + r)^n[/math]. [*]Changing the value of [math]P[/math] does not change the value of the factor [math](1 + r)^n[/math], but it will change the value of the expression by a factor of [math]P[/math]. In other words, the change in [math]P[/math] will multiply by the result of [math](1 + r)^n[/math]. [*]Similarly, changing [math]r[/math] changes the base of the exponent (the number that will be multiplied by itself), but does not change the value of [math]P[/math]. This change will affect the value of the overall expression. [*]Changing [math]n[/math] changes the number of times [math](1 + r)[/math] will be multiplied by itself, but does not change the value of [math]P[/math]. This change will affect the value of the overall expression. [/list] This applet is provided by Walch Education as supplemental material for the [i]CCGPS Coordinate Algebra[/i] program. Visit [url="http://www.walch.com"]www.walch.com[/url] for more information on our resources.