Question

Alicia invested $35,000. Each year,6% of the current years account value isn’t earned in interest (Compound Interest).

What growth factor will be used to calculate the amount of interest each year?

Answer 1

Answer:

1.06

Step-by-step explanation:

The equation for compounded interest is:

A = P (1 + r)^t

where A is the final amount,

P is the initial amount,

r is the annual interest rate as a decimal,

and t is the time in years.

The growth factor is 1 + r.  In this case, r = 0.06.  So the growth rate is 1.06.