Problem 1
Set the base of the exponent equal to 1+r and solve for r.
1+r = 0.57
r = 0.57-1
r = -0.43
The result is negative, which tells us we have exponential decay. Notice that b = 0.57 fits the interval 0 < b < 1.
The rate of decay is 43%
The initial value is a = 35 since this is the first value mentioned in the equation. Plugging x = 0 into the equation will lead to y = 35.
Let's now plug in x = 3
y = 35*(0.57)^x
y = 35*(0.57)^3
y = 35*0.185193
y = 6.481755
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Answers in bold:
- 1a. Decay
- 1b. 43% decay rate
- 1c. 35
- 1d. 6.481755
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Problem 2
We'll follow similar steps as problem 1.
1+r = 1.23
r = 1.23-1
r = 0.23
The r value is positive, so we have growth this time. Notice that b = 1.23 fits the interval b > 1.
The growth rate is 23% since r = 0.23 converts to this.
The initial value is a = 225. Compare y = a(1+r)^x to y = 225(1.23)^x to see how the terms match up. If you want you can think of it like y = 225(1+0.23)^x. Plugging x = 0 into the equation will lead to y = 225.
Let's plug in x = 2.
y = 225*(1.23)^x
y = 225*(1.23)^2
y = 225*1.5129
y = 340.4025
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Answers in bold:
- 2a. Growth
- 2b. Growth rate is 23%
- 2c. 225
- 2d. 340.4025