Question

What is the annual compound interest rate for an investment account modeled by the function y=12⋅1.18t ?

Answer 1

The interest rate for the given investment is 18%.

Explanation:

We are given that,

The function representing the investment model is,
`y=12(1.18)^t`.

It is required to find the interest rate for the investment.

Since, the function can be re-written as,

`y=12(1.18)^t`

i.e.
`y=12(1+0.18)^t`

So, on comparing with the formula for compound interest i.e.
`A=P(1+r)^t`, where 'r' is the interest rate.

We have that,

The interest rate for the given investment is 0.18 i.e. 18%.