Question

The expression 10,600(1.0385)x represents the amount of money in an investment account with interest that compounds annually for x years. Interpret the meaning of the expression.

A

The initial investment is $10,385, and the growth rate of the investment is 1.06%.

B

The initial investment is $10,385, and the growth rate of the investment is 6%.

C

The initial investment is $10,600, and the growth rate of the investment is 1.0385%.

D

The initial investment is $10,600, and the growth rate of the investment is 3.85%.

Answer 1

The correct option is option (D)

The initial investment is $10,600 and the growth rate of the investment is 3.85%.

Explanation:

The formula of compound interest:

`A=P(1+r)^n`

A= Total amount after n years

P= Initial value of deposit

r= rate of interest compound annually

n= time is in year

Given expression is

`A=10,600(1.0385)^x`

`A=10,600(1+0.0385)^x`

Now we compare the given expression with the compound interest formula

So,

P= 10,600

r=0.0385 =3.85%

So, the initial investment is $10,600 and the growth rate of the investment is 3.85%.