Ratio, proportion & rates of change · Percentages & growth
Chapter 1 · 3
The idea
Compound growth and decay
Why repeated percentage change is a power of the multiplier, how compound interest differs from simple interest, and how to build growth and decay models.
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Ratio, proportion & rates of change · Percentages & growth
Compound growth and decay
Why repeated percentage change is a power of the multiplier, how compound interest differs from simple interest, and how to build growth and decay models.
Why it works
The same multiplier, over and over
Compound growth is what happens when the same percentage change is applied over and over, each time to the new total. Because each step is a multiplication by the same multiplier, doing it times is that multiplier raised to the power .Say earns interest a year, compounded. Each year the balance is multiplied by :
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The rest of the explanation, plus 2 worked examples you step through move by move.
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