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Math103 03
Math103 03
is x.
√
Definition 4. x1/n = n x
√
Definition 5. x m/n = n xm
Definition 6. logb x is the power b must be
raised to in order to obtain x.
I = amount of interest
n ·rt
1 r
F = P 1 + n/r
" n #rt
1 r
F =P 1 + n/r
N
When n is very large, so is N , and 1
1+N
gets very close to the mathematical constant
e, which is an irrational number approximately
2.71828.
n
r
1 + n = 1 + AP Y
n
r
AP Y = 1 + n − 1
If interest is compounded continuously, the cor-
responding formula is
AP Y = er − 1.
Systematic Savings
After t years . . .
F =
r r 2 r nt−1
D+D 1 + +D 1 + +. . . D 1 + .
n n n
F = 2 nt−1!
r r r
D 1+ 1+ + 1+ + ... 1 + .
n n n
2 k−1 r
1+a+a +. . . a , where a = 1+ and k = nt
n
There is a formula for such sums, which are
called geometric series.
2 k−1 1 − ak
1 + a + a + ...a = .
1−a
r nt
1 − 1 +
n
F = D
r
1− 1+
n
r nt
1+ − 1
n
F = D
r
n
This can be used to find the future balance as
well as to find the size of the periodic deposits
needed to obtain a given future balance.
F · nr
D= .
r nt
1+ −1
n
Amortized Loans
In a typical loan, the borrower is lent an amount
P and makes periodic repayments R to reduce
the balance owed until the balance is reduced
to 0. This may be analyzed directly in a man-
ner similar to the analysis of periodic savings.
r nt
1+ − 1
n
F = R .
r
n
A loan in the amount P would grow to
r nt
a future value P 1 + .
n
r nt
r nt
1+ − 1
n
P 1+ = R .
n r
n
nt
r
1 1+ − 1
n
P = nt · R
r r
1+ n
n
−nt
r
1 − 1 +
n
P = R
r
n
r −nt
1 − 1 +
n
P = R
r
n
P
R=
r −nt
1 − 1 +
n
r
n
P · nr
R=
r −nt
1− 1+
n