Modeling Financial Growth and Decay with Exponential Functions

Miacademy & MiaPrep Learning Channel

This video connects abstract algebraic concepts to real-world financial literacy by exploring how exponential functions model money. It specifically focuses on constructing equations in the form y = a(b)^x to represent scenarios involving compound interest and depreciation. Through a step-by-step analysis, the presenter, Justin, guides viewers through setting up equations, defining variables, and interpreting the results to make predictions about future value. The lesson addresses key themes such as the difference between growth and decay in financial contexts. A significant portion of the video is dedicated to debugging common student misconceptions, such as using the percentage rate directly as the base of the exponent. By testing these incorrect assumptions with input-output tables, the video visually demonstrates why the growth factor must be calculated as (1 + r) for growth and (1 - r) for decay, providing a deep conceptual understanding of the mathematics involved. For educators, this resource serves as an excellent bridge between theoretical algebra and practical application. It encourages critical thinking by asking students to predict outcomes and verify equations using logic and tables. The video culminates in a comprehensive word problem about a college savings account, providing a model for solving multi-step application problems that students will encounter in standard Algebra curricula.