Rate of increase or decrease or % interest
CONCEPTS
Rate of Increase / Decrease or % Interest Equation
• Total = initial * (1 + rate)ᵗᶦᵐᵉ => increase (rate is a decimal, time is in years)
• Total = initial * (1 - rate)ᵗᶦᵐᵉ => decrease (rate is a decimal, time is in years)
EXAMPLES
• An initial investment of $100 increased annually by 5%. How much was there after 2 years?
T = 100(1 + 0.05)²
• An initial investment of $100 decrease annually by 5%. How much was there after 3 years?
T = 100(1 - 0.05)³
• An initial investment of $100 increased monthly by 5%. How much was there after 2 years?
T = 100(1 + 0.05/12)²
PRACTICE PROBLEMS
Question 1 A person starts with an initial amount of $10. The value increases by 20% each year. What's the total after 5 years?
-- Answer -- $10 (1.2)⁵
Total = initial * (1 + rate)ᵗᶦᵐᵉ => Total = $10 (1 + 20%)⁵ = $10 (1.2)⁵
ACT PRACTICE PROBLEMS
