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SAT Math: Numbers and Operations Drill 1, Problem 2. If the masterpiece will be worth $45,055 in five years, what is its worth now?
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SAT Math 2.3 Numbers and Operations 194 Views
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Description:
SAT Math 2.3 Numbers and Operations. If Joaquin invests $500, how much will the investment be worth after 3 years?
- Numbers and Operations / Ratios, Proportions, and Percents
- Algebra and Functions / Word Problems
- Product Type / SAT Math
- Mathematics and Statistics Assessment / Word Problems and Applications
- Algebra / Create equations that describe numbers or relationships
- Algebra / Create equations that describe numbers or relationships
- Algebra / Create equations that describe numbers or relationships
- Heart of Algebra / Interpreting linear functions
Transcript
- 00:02
Here’s your shmoop du jour, brought to you by compounding interest.
- 00:07
Sort of like… your level of interest in this video.
- 00:11
A certain investment pays 8% interest compounded annually.
- 00:16
If Joaquin invests $500, how much will the investment be worth after 3 years?
- 00:22
And here are your potential answers...
Full Transcript
- 00:29
We’re so glad we talked Joaquin out of investing his money in that magic bean business he was so hot on.
- 00:34
So he makes 8% interest on his investment each year…
- 00:38
…which means that, at the end of each year, he has 108% of the amount he had a year earlier.
- 00:44
There are two ways we can go from here. We can grind it out and just manually take 108%
- 00:49
of that initial $500, and then do the same another two times…
- 00:53
…or we can use our handy-dandy compounding interest formula.
- 00:57
What is it?
- 00:58
Amount earned after n years equals the initial amount times 1 plus the
- 01:04
interest rate to the power of n…years.
- 01:08
So…plugging in what we know…
- 01:11
500 times the quantity 1 plus .08 to the third power…right third power
- 01:17
since that’s how many years have gone by.
- 01:20
Looks like our answer is C, since we get $629.86.
- 01:24
Well…WE don’t get $629.86. It would be nice though.
- 01:27
We could really use a five-year supply of magic beans…
- 01:42
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