Question

Toni invests money into an account which pays a fixed rate of compound interest each year. The total value, ?V, of her investment after t years is given by the formula: V = 1350 x 1.04^t Answer questions a & b a- How much money did Toni invest in pounds b- What rate of compound interest is paid each year

Answer 1

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Answer 2

Answer:

a. $ 1,350

b. 4%

Step-by-step explanation:

a. Given function that shows the total value of Toni's investment after t years,

$V=1350(1.04)^t$,

Initially, ( when he invested ),

t = 0,

Thus, the invested amount = $1350(1.04)^0$ = 1350(1) = $ 1,350,

b. Since, the amount formula in compound interest,

$A=P(1+\frac{r}{n})^{nt}$

Where,

P = Initial amount,

r = annual rate per period,

n  = number of periods per period,

t = number of years,

Here, the amount is compounded annually,

i.e. n = 1,

By the given function,

$V=(1+0.04)^t$

By comparing,

r = 0.04 = 4%

Hence, 4% interest is paid annually.