Maths-
SAT
Easy

Question

Each year the value of an investment increases by 2.5% of the previous year's value. The initial value of the investment was $500. Which equation gives the value of the investment y, in dollars, x years after the initial investment was made?

  1. y = 500(0.25)x
  2. y = 500(1.025)x
  3. y = 500(1 .25)x
  4. y = 500(2.5)x

The correct answer is: y = 500(1.025)x


    The increment is 2.5 % of previous year's value.
    The exponential function = (Initial value) (1 + percent value)x
    equals 500 open parentheses 1 plus fraction numerator 2.5 over denominator 100 end fraction close parentheses to the power of x
equals 500 open parentheses 1 plus 0.025 close parentheses to the power of x equals 500 open parentheses 1.025 close parentheses to the power of x

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