Applications of Exponential Equations The Good, The Bad, and The Ugly

1
Applications of Exponential EquationsThe Good,
The Bad, and The Ugly

• The Good
• Lets say we put 260 per month in a safer
  mutual fund. To make things simple, well hold
  our investment and just compound yearly
• Using the compound interest formula
• A P(1 r/n)nt and assuming an 8 return,
• How much money would we have after 1 year?
• 2 years?
• 10 years?
• 30 years?
• 40 years?

2
Applications of Exponential EquationsThe Good,
The Bad, and The Ugly

• The Bad
• The Consumer Price Index (CPI) is the cost of a
  bundle of goods needed for basic everyday living.
  The formula is as follows
• CPI 29 (2.71).04t
• CPI is the price of a bundle of goods in any
  year. The original CPI was 29 in the year 1960,
  and the average rate of inflation in a given year
  is around 4. t will represent the number of
  years since 1960.
• What was the price of a necessary weeks goods in
  1960?
• 1970?
• 1980?
• 2000?
• 2013?
• 2020?

3
Applications of Exponential EquationsThe Good,
The Bad, and The Ugly

• The Ugly
• Most credit cards have an interest rate between
  18 and 26. The interest is compounded monthly on
  any unpaid portion of your balance. Assume a
  purchase of a flat-screen TV for 1500. Assuming
  the customer only pays the minimum monthly
  payment of 25
• What happens to the balance owed over the course
  of the 1st year at a 21 interest rate?
• 2 years?
• When do you think this purchase will be paid off
  only using the minimum monthly payment?