Question

The equation A= 1750(1.04)t represents an account balance t years after the account was created. Which statement is correct?

A. The account balance will decrease 0.04% each year.
B. The account balance will increase 0.04% each year.
C. The account balance will decrease 4% each year.
D. The account balance will increase 4% each year.

Answer 1

D. The account balance will increase 4% each year.

Explanation:

Given the equation :

A= 1750(1.04)t

This is an exponential growth rate equation which has it's general format as :

A = A0 * (1 + r)^t

A0 = initial value,

Since (1 + r) is greater Than 1 ; then we conclude that it is a growth relation.

1 + r = 1.04

The rate, r = (1.04 - 1) = 0.04

r = 0.04 = (0.04 * 100%) = 4%

Hence, The account balance will increase 4% each year.