Question

Mr. Davis invested $8,000 in a savings account. The bank pays 4.5% annual compound

interest. Mr. Davis never withdrew nor deposited in the savings account. Which of the
following exponential graphs represents the money y that Mr. Davis has after x years

Answer 1

Compound interest formula

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

where:

• A = final amount
• P = principal
• r = interest rate (in decimal form)
• n = number of times interest applied per time period
• t = number of times periods elapsed

Given:

• A = y
• P = $8,000
• r = 4.5% = 0.045
• n = 1
• t = x

Substitute given values into the equation:

`\implies y=8000(1+(0.045)/(1))^x`

`\implies y=8000(1.045)^x`

So the graph will have a y-intercept of (0, 8000)