Finding the Rate Increase

Question

The equation f(x) = 1,200(1.03)^x models the amount of money in a savings account. At what rate per year does the money increase? (x= # of years)

Answer 1

Initial amount:          $1200

After first year:         $1200(1.03)

After second year:    $1200(1.03)(1.03)

After third year:       $1200(1.03)(1.03)(1.03)

 

So, each year the savings amount is 1.03 times, or 103% as much as, the previous year.  That means a 3% interest rate.

 

The formula is    A = P(1+r)^T 

      A=amount    P=principal    r=rate   T=time

Answer 2

Hi Kumba,

 

I assume you can use Calculus? Correct?