Question

What is the annual compound interest rate for an investment account modeled by the function

y = 12 * 1.14t?
a.
0.14%
c.
14%
b.
12%
d.
114%

Answer 1

C. 14%

Explanation:

We are given the function modeling the investment account as,

`y = 12(1.14)^t`

It is required to find the annual interest rate for the investment.

On simplifying the function, we have,

`y = 12(1.14)^t`

⇒
`y = 12(1+0.14)^t`

As, the general form for the compound interest is
`A=P(1+r)^t`, where r is the interest rate.

On comparing we get,

The interest rate for the model is 0.14 i.e. 14%

Hence, option C i.e. 14% is correct.