Question

Sarah invests her graduation money of $1,750 in an annuity that pays an interest rate of 6% compounded annually. Sarah wants to determine the amount of money that will be in the account after a certain number of years if she leaves the money in the account and doesn’t make any deposits or withdrawals. Which function can Sarah use to describe her investment growth?

Answer 1

`A = 1750(1.06)^(t)`

General Formulas and Concepts:

Pre-Algebra

Order of Operations: BPEMDAS

1. Brackets
2. Parenthesis
3. Exponents
4. Multiplication
5. Division
6. Addition
7. Subtraction

• Left to Right

Algebra I

Compounded Interest Rate Formula:
`A = P(1 + (r)/(n) )^(nt)`

• A is final amount
• P is principle amount
• r is rate
• n is compounded rate
• t is time (in years)

Explanation:

Step 1: Define

Given

Principle Amount = $1750

r = 6% = 0.06

n = 1 (compounded annually)

Step 2: Write function

Substitute into formula

1. Substitute [CIR]:
   `A = 1750(1 + (0.06)/(1) )^(1t)`
2. (Parenthesis) Divide:
   `A = 1750(1 + 0.06)^(1t)`
3. (Exponents) Multiply:
   `A = 1750(1 + 0.06)^(t)`
4. (Parenthesis) Add:
   `A = 1750(1.06)^(t)`

This equation tells us how much money A the investment has gained over t years.