Answer: Choice B) Investment decreases by 3% each month
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Explanation:
We won't use the value 2500 at all.
The base of the exponential is 0.97
Set this equal to 1+r and solve for r
1+r = 0.97
r = 0.97-1
r = -0.03
The negative r value indicates we have exponential decay, so the value of the investment decreases by 3% each month.
Let's say you had $100 to start off. This would mean the investment would be worth $97 after one month is up.
