Question

The general form for a compound interest function is B(t)=P(1+r/n)^nt . Assuming that n=1 , rewrite the compound interest equation B(t)=900(1.185)^t  in the general form. Using your rewritten equation, what is the percent rate of change?

Answer 1

The formula $B(t)=P(1+\frac{r}{n})^{nt}$, for n=1 becomes $B(t)=P(1+\frac{r}{1})^{1\cdot t}=P(1+r)^t$.

Comparing $B(t)=P(1+r)^t$ with $B(t)=900(1.185)^t$, we see that 

P=900, and 1+r=1.185, which means that r=0.185.


r=0.185 can be written as 18.5%, as a percentage.


Answer: 18.5%