Question

The model y = 500(1.035)^x, indicates the value of an investment, where x is the number of whole years. What's the growth factor (the ratio from one year to the next)?

Answer 1

Given:
model y = 500(1.035)^x is the value of the an investment after x years.

the growth factor of this model is 1.035

Let us assume that x = 3 and x = 2

y = 500(1.035)² = 500 (1.07) = 535
y = 500(1.035)³ = 500 (1.11) = 555

growth factor = 555 / 535 = 1.037 or 1.035