Question

Suppose that an investment of $25,000 grows in value at a rate of 3% per year. What is the growth factor for this investment?

Answer 1

The investment amount after one year 25000(1.03)
The growth factor is 1.03

Answer 2

1.03

Explanation:

We have been given that an investment of $25,000 grows in value at a rate of 3% per year. We are asked to find the growth factor for the given investment.

We will use exponential growth function to solve our given problem.

`y=a\cdot b^x`, where,

a = Initial value,

b = For growth factor b is in form (1+r), where, r represents rate in decimal form.

Let is convert our given rate in decimal form.

`3\%=(3)/(100)=0.03`

Upon substituting our given values in exponential growth formula, we will get

`y=\$25,000(1+0.03)^x`

`y=\$25,000(1.03)^x`

Therefore, the growth factor of our given investment is 1.03.