Question

An investment of $200 increases at a rate of 9.5% per year. What is the growth factor, b?

Answer 1

The standard form for rate equation is:

F = P (1 + r)^n

or

F = P b^n

So b = 1 + r

In this case, r is given as 9.5% or 0.095. Therefore:

b = 1 + 0.095

b = 1.095

The growth factor is 1.095.