Question

The function V(t)=1,000(1.06)^t models the value of an investment after t years. What does the ".06" represent in the function?

A.The interest rate of the investment

B.The initial amount of money invested

C.The growth factor of the function

D.The total amount of money earned in the investment

Answer 1

A

Explanation:

Looking at the function, we have;

V(t) = 1,000(1.06)^t

Mathematically, the amount earned on an investment that offers a particular constant percentage return to a particular number of years can be written as;

V = I(1 + r)^t

where V is the value of the investment after some certain number of years

I is the initial amount invested

r is the constant percentage increase

and t is the number of years.

Let’s now re-write what we can deduce in the question.

This is;

V(t) = 1000(1 + 0.06)^t

Thus what this 0.06 represents is r which is the constant interest rate