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Given an exponential function for compounding interest, A(x) = P(0.95)^x, what is the rate of change?

A) -0.05%
B) -95%
C) -5%
D) 95%

User Cheersmate
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1 Answer

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Final answer:

The rate of change in the function A(x) = P(0.95)^x is a 5% decrease per period, which is option C) -5%.

Step-by-step explanation:

The rate of change in the given exponential function for compounding interest, A(x) = P(0.95)^x, can be understood by looking at the base of the exponent, 0.95. This base is less than 1, which indicates a decay in value over time, equivalent to a decrease or negative growth. Since 0.95 is the factor by which the initial amount P is multiplied each period, we can calculate the rate of change by subtracting this value from 1 and converting it to a percentage: 1 - 0.95 = 0.05, which is 5%. Therefore, the rate of change is a 5% decrease per period, which corresponds to option C) -5%.

User Supakeen
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