Question

Will used the function C = 1,906(1.03)t to determine the amount of money compounded in his savings account. Select all of the statements below that describe the meaning of 1.03 in Will's function. (there are 3 answers)

a. Will leaves the money in his savings account for 1.03 years.

b. The money in Will's account increases by $1.03 each year.

c. The growth factor of Will's savings account is 1.03.

d. Will's savings account increases by 3% each year.

e. Will opened his savings account with $1.03.

f.Will's account has a growth rate of 0.03.

Answer 1

The statements (c) and (d) are correct.

Explanation:

The general formula to compute the compound interest is:

`C=P(1+r)^(t)`

Here,

P = principal amount

r = rate of interest

t = time

The function provided to determine the amount of money compounded in Will's savings account is:

`C=1906(1.03)^(t)`

On comparing the two equations it can be seen that:

`1+r=1.03\\r=1.03-1\\r=0.03`

So the interest rate is, 3%.

So, the number 1.03 implies that Will's savings account increases by 3% each year.

And the growth factor of Will's savings account is 1.03.

Thus, the statements (c) and (d) are correct.