Question

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

Answer 1

The correct statement is D. The account balance will increase 4% each year.

Correct statement and 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.

Source:

Tennessee Comprehensive Assessment Program - Algebra I Practice Test

Explanation:

Let's recall that 1.04 is the result of adding:

1 + 0.04 and, we can also write 0.04 as 4/100 or 4%,

in consequence,

1.04 = 1 + 4%, where we're increasing an additional 4%.

The correct statement is D. The account balance will increase 4% each year.