If the account gives an annual simple interest of 2%, express as a function of time.

Question

Johny opens a personal bank account to put into part of his monthly allowance. If the account gives an annual simple interest rate of 2%, express the amount in Johny's account as a function of time t (in years). Graph the function.

Answer 1

P(t) = P₀ + P₀*r*t = P₀(1 + rt)

• P(t) = Money in Johnny's account at timr t
• P₀ = starting amount in Johnny's account
• r = interest rate expressed as a decimal = 2% = 0.02
• t = time

 

P(t) = P₀(1 + 0.02t)