Question
You will deposit $500 in a bank account at a 7% interest compounded annually. The formula for compound interest
You will deposit $500 in a bank account at a 7% interest compounded annually. The formula for
compound interest is shown below:
A(t) = P (1 + r/n)^(nt)
a. Select the values of P, r, and n from the problem statement.
b. If you graph t vs. A, will the graph be increasing, decreasing or constant? Explain.
c. Write the formula that describe the data given.
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Koala Tutor
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Got a question with my answer?
a. P = $500 (initial deposit), r = 0.07 (interest rate), n = 1 (interest compounded annually)
b. The graph of t vs. A will be increasing because compound interest grows over time. As time (t) increases, the amount of money in the account (A) will also increase due to the interest earned.
c. The formula that describes the data given is:
A(t) = 500(1 + 0.07/1)^(1t)
= 500(1.07)^t
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