Homework Help: exponential function

Posted by Jus on Sunday, May 17, 2009 at 7:14pm.

An investment pays 8% interest, compounded annually.

a) write an equation that expresses the amount, A, of the investment as a function of time, t, in years.

b) determine how long it will take for this investment to double in value and then to triple in value.

c) determine the percent increase in value of the account after 5 years and then after 10 years.

d) explain why the answers to parts b and c do not depend on the amount of the initial principal.

Can someone explain to me how to get started? I do not know where to start except for the fact that I need to make an exponential function.

exponential function - Damon, Sunday, May 17, 2009 at 7:56pm
after one year
A = Ao (1.08)
after two years
A = Ao (1.08)(1.08)
after three years
A = Ao (1.08)(1.08)(1.08)
after t years
A = Ao (1.08)^t

When is A/Ao = 2?
2 = 1.08^t
log 2 = t log 1.08
.301 = t * .0334
t = 9.01 years to double

That should get you started.
exponential function - Jus, Sunday, May 17, 2009 at 8:04pm
did i do part c right?

c) determine the percent increase in value of the account after:
5 years,
A=(1.08)^5
=1.47
therefore 1.47 % increase???
exponential function - Jus, Sunday, May 17, 2009 at 8:09pm
c) continued:
after 10 years
A=(1.08)^10
=2.16
therefore 2.16% increase?

Am I doing this right?

d) Explain why the answers to parts b and c do not depend on the amount of the initial principal.
exponential function - Damon, Sunday, May 17, 2009 at 8:12pm
" =1.47
therefore 1.47 % increase??? "

A factor of 1.47 is a 47% increase
100 * final/original = 147/1 =147 %
which is 47 % over the original 100%
exponential function - Damon, Sunday, May 17, 2009 at 8:13pm
2.16 * 100 = 216 % of original
216 % - original 100% = 116% increase

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