Money in a bank account that compounds interest by some percentage acts _______.?
A.linearly
B.exponentially
C.negatively
D.like a fraction
Is it B?
Correct.
Yes, the correct answer is B. Money in a bank account that compounds interest by some percentage acts exponentially.
To arrive at the answer, let's break down the options:
A. Linearly - When something acts linearly, it means that there is a constant increase or decrease over time. In the context of a bank account with compound interest, the interest earned each period is added to the initial amount, resulting in a non-linear growth pattern. Therefore, the money does not act linearly.
B. Exponentially - Exponential growth occurs when the value increases rapidly over time, based on the principle of compounding. In this case, the interest earned is added to the initial amount, and subsequently, future interest is calculated based on this new, larger balance. This compounding effect causes exponential growth of the account balance, making option B the correct answer.
C. Negatively - Negative growth implies a decrease in value over time. Since compound interest involves increasing the value of the account over time, the money does not act negatively.
D. Like a fraction - While it is true that interest rates can often be expressed as fractions, this does not accurately describe how money in a bank account with compound interest behaves. The account balance grows exponentially due to compounding, and it is not directly related to the concept of fractions.
Therefore, the most suitable option is B, as money in a bank account that compounds interest by some percentage acts exponentially.