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The value of $500 after four years is $610
<u>Step-by-step explanation:</u>
It is given that, the value of $500 increases at a rate of 5% per year.
The exponential formula is given by .
where,
- a is the initial amount.
- b is the growth factor .
The growth factor b is replaced by either (1 + r) or by (1 - r).
where, r is the rate per year.
b= (1+r) represents the increase in growth rate.
b= (1-r) represents the decrease in growth rate.
Here, the growth rate is increased. So the formula is given by
where,
- The initial amount, a = 500.
- Rate, r = 5% = 5/100 = 0.05
- Number of years, n= 4.
- y = value of the item after 4 years
<u>To find y value :</u>
⇒
⇒
⇒
⇒
Therefore, the value of the item after four years is $610.