Question

You decide to invest $10,000 in an account where the interest compounds annually. Create an exponential function to represent how much money you will have after 20 years if the money grows at a rate of 7.5 percent

Answer 1

Apply the compound interest formula:

• A= P (1 + r/n)^nt

Where:

A = future value

P = Principal investment = $10,000

r = interest rate in decimal form = 7.5 /100 = 0.075

n= number of compounding periods per unit t = 1 (anually)

t= years = 20

Replacing:

A = 10,000 ( 1+ 0.075 )^20