Question

You deposit 500 in a savings account that earns 9% annual interest compounded monthly. Enter a function that represents the balance y (in dollars) after t years

Answer 1

Answer: y = 500 * ( 1 + 0.75%) ^ (t * 12)

Step-by-step explanation:

Formula for calculating the amount of money in an account as a result of compound interest is:

Balance = Amount * ( 1 + rate) ^ no. of periods

This interest is compounded monthly so has to be converted to a monthly rate:

= 9% / 12

= 0.75%

t is in years so has to be converted as well to months:

= t * 12 months

Function is therefore:

y = 500 * ( 1 + 0.75%) ^ (t * 12)