Question

Shota invests $2000 in a certificate of deposit that earns 2% in interest each year.Write a function that gives the total v(t) in dollars of the investment t years from now

Answer 1

The correct answer is v(t) = (principal × time × 0.02) if calculated simply and v(t) = Principal ×
`( 1.02) ^ {time}` where v(t) is the interest after t years .

Explanation:

Principal amount invested by Shota is $2000.

Interest is earned at 2% per year.

Time for which the principal is invested is t years.

Therefore let the total interest be v(t) dollars in t years.

Case 1: Simple Interest.

v(t) = (principal × time ×
`(r)/(100)` ) = (2000 × t × 0.02) = 40t

Case 2: Compound Interest.

v(t) = Principal ×
`( 1+ (r)/(100)) ^ {t}` - Principal = 2000 ×
`( 1.02) ^ {t}` - 2000.