Question

The expression 1,000(1.0175)^2t describes the amount of money in a savings account after t years. Complete the statements.

The interest rate is compounded each year. The annual interest rate on the account is _________.
A) Compounded monthly
B) Compounded annually
C) Compounded daily
D) Compounded semi-annually

Answer 1

The annual interest rate on the account described by the expression 1,000(1.0175)^2t is compounded annually.

Step-by-step explanation:

The expression 1,000(1.0175)^2t represents the amount of money in a savings account after t years, given an initial deposit of $1,000. From the formula, we deduce that the interest is compounded at the factor (1.0175)^2 each year. By taking the square root of (1.0175)^2, we obtain the factor 1.0175, which corresponds to an annual interest rate. Therefore, the interest rate is compounded once per year, or compounded annually.