Suppose one of your ancestors invested $500 in 1800 in an account paying 4% interest compounded annually. How do you write an exponential function to model the situation?

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Answer 1 · 2018-07-22T14:31:08

#color(blue)(f(t)=500(1.04)^t)#

The formula for compound interest is given as:

#FV=PV(1+r/n)^(nt)#

Where:

#FV# is the future value.

#PV# is the present value.

#r# is the interest rate as a decimal.

#n# is the compounding period.

#t# is the time in years.

We have:

#PV=500#

#r=4/100=0.04#

#n=1# ( annually )

#FV=500(1+(0.04)/1)^t#

#FV=500(1.04)^t#

This is an exponential form:

#f(t)=500(1.04)^t#