Exponentials
Compound Interest
Application 6
You were given $100 for your birthday. You choose to put the money in an interest-bearing account that earns 4.5% interest compounded quarterly. What equation will model the total amount of money in the account?
*Note: When the interest is compounded more than once per year, the formula becomes 
; 
represents the portion of interest earned for each compounding cycle, 
represents the number of compounding cycles.
Step 1. Determine P. The initial amount is 100.
Step 2. Determine nt. The interest rate is 4.5% compounded quarterly. Therefore, the rate must be divided into 4 equal parts.
Step 3. Determine nt. The interest is compounded quarterly; therefore n = 4.
Step 4. Write the equation.
