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Rates and the Growth of Money
Brief Description: This three-part activity asks students to: (1) derive a general interest rate formula, and (2) simulate and examine the growth of money at several different interest rates and compounding periods. Extension activities look at extreme compounding periods.
activity involves applying exponential functions and parametric
equations and graphing to problems involving simple
and compound interest.
Figure 1. A simulation of the growth of a $1,000 investment at 5% (money market), 8% (bonds) and 16% (stocks) monthly for 20 years, compounded monthly
Figure 2. A graph of the relationship between accumulation and compounding period for a very special case.
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Last modified on August 15, 2001.