Question

Write a formula that describes the value of an initial investment of $100 that loses its value at a rate of 80% per year compounded 6 times. per year.

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Answer 1

Answer: option d is the correct answer

Explanation:

Initial amount is $100. This means that the principal is

P = 100

It was compounded 6 times in a year. So

n = 6

The rate at which the principal was compounded is 8%. So

r = 8/100 = 0.08

The number of years is t

The formula for compound interest is

A = P(1+r/n)^nt

A = total amount in the account at the end of t years.

Since the amount is reducing,

A = P(1-r/n)^nt

Therefore

A = 100 (1 - 0.08/6)^6t

Answer 2

see below

Explanation:

The formula is the same whether the change in a compounding period is positive or negative. Here, it is negative.

A = P(1 +r/n)^(nt)

for P = 100, r = -0.08, n = 6. So, you have ...

A = 100(1 -0.08/6)^(6t)