Understanding Compound Interest

The video tutorial explains how to calculate the future value of a savings account with an initial deposit of $3,800 and an annual interest rate of 1.8%. It demonstrates the calculation for the first year, simplifies the expression using mathematical factoring, and explains the concept of compound growth over 15 years. The tutorial emphasizes the power of compound interest and provides an expression to determine the account balance after 15 years.

What is the initial amount deposited in the savings account?

• $3,600

• $4,000

• $3,800

• $3,500

What is the interest rate provided by the bank on the savings account?

• 2.5%

• 2.0%

• 1.8%

• 1.5%

How is the interest for the first year calculated?

• By multiplying the initial amount by 1.8

• By dividing the initial amount by 1.8

• By adding 1.8% of $3,800 to the initial amount

• By subtracting 1.8% of $3,800 from the initial amount

What mathematical operation is used to simplify the expression for the amount after one year?

• Division

• Factoring

• Subtraction

• Addition

What is the expression for the amount in the account after two years?

• 3,800 * 1.18^4

• 3,800 * 1.18

• 3,800 * 1.18^3

• 3,800 * 1.18^2

How many times is the growth factor applied over 15 years?

• 15 times

• 18 times

• 10 times

• 12 times

What is the final expression for the amount in the account after 15 years?

• 3,800 * 1.18^15

• 3,800 * 1.18^18

• 3,800 * 1.18^10

• 3,800 * 1.18^12

What is the term used to describe the growth of the account balance over time?

• Exponential growth

• Compound growth

• Linear growth

• Simple growth

Why does 1.8% growth per year result in a significant amount over 15 years?

• Because of simple interest

• Due to the high initial deposit

• Because of compound interest

• Due to annual withdrawals

What is the key takeaway about compound growth from the video?

• It has no significant impact over time

• It results in a decrease in the account balance

• It is only beneficial for short-term investments

• It leads to substantial growth over a long period