SAT Math 2.3 Numbers and Operations. If Joaquin invests $500, how much will the investment be worth after 3 years?
|Algebra||Create equations that describe numbers or relationships|
|Algebra and Functions||Word Problems|
|Heart of Algebra||Interpreting linear functions|
|Mathematics and Statistics Assessment||Word Problems and Applications|
|Numbers and Operations||Ratios, Proportions, and Percents|
|Pre-Algebra||Ratios, Percentages, and Proportions|
|Product Type||SAT Math|
|SAT Math||Numbers and Operations|
We’re so glad we talked Joaquin out of investing his money in that magic bean business he was so hot on.
So he makes 8% interest on his investment each year…
…which means that, at the end of each year, he has 108% of the amount he had a year earlier.
There are two ways we can go from here. We can grind it out and just manually take 108%
of that initial $500, and then do the same another two times…
…or we can use our handy-dandy compounding interest formula.
What is it?
Amount earned after n years equals the initial amount times 1 plus the
interest rate to the power of n…years.
So…plugging in what we know…
500 times the quantity 1 plus .08 to the third power…right third power
since that’s how many years have gone by.
Looks like our answer is C, since we get $629.86.
Well…WE don’t get $629.86. It would be nice though.
We could really use a five-year supply of magic beans…