Question

Jane invested $755 in an account that earns interest at a rate of 8.5%, compounded annually. Which equation can be used to determine the value, V (in dollars), of Jane's investment after t years? A. V = 755 + 1.085t B. V = 755 (1.085t) C. V = 755 (1.085)' 755 (1.085)

Answer 1

Let:

`\begin{gathered} V=\text{Value of jane's investment after t years} \\ P=\text{ Principal or initial investment}=755 \\ r=\text{interest rate}=0.085 \\ n=\text{Number of times interest is compounded per year}=1 \\ t=\text{time} \end{gathered}`

Therefore:

`\begin{gathered} V=P(1+(r)/(n))^(nt) \\ V=755(1+0.085)^t \\ V=755(1.085)^t \end{gathered}`