Question

Joey has $400 in a bank account that earns 8% in annual interest. Would this equation be Linear or Exponential?

Answer 1

Exponential

The first year, he would earn 8% interest on the $400 deposited, so he'd have $432. The next year, he would earn 8% interest on the interest earned the previous year in addition to the amount deposited, so he'd have $466.56.

His bank balance would follow the compound interest equation which is exponential.

= 400 × 1.08^t

where t is the number of years since the deposit