The formula to find the amount in an account, A, that has an interest rate, r, that compounds n times per year and has a starting balance of P after t years is A = P (1+r/n)∧nt . If the interest is compounded yearly, then n = 1 and the interest rate, r, represents the annual interest. When the interest is compounded monthly, then n = 12 but r is still the annual interest.

If you were given the equation A = P (1 + r)∧t how often is the interest compounded?

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If you were given the equation A= P( 1.17)∧t , what would the annual interest rate be?

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What would need to change about the equation in part b for it to represent an account that is compounded monthly?

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Use the properties of exponents to rewrite the equation given in part b so that it represents an account that is compounded monthly.

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What would be the approximate monthly interest rate that is equivalent to the annual interest rate represented in the equation given in part b?

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