Question

Mary's bank account pays interest that compounds annually. The total value of the bank account, in dollars, after t years is given by the expression 800(1+0.02)t.
What does the number 0.02 represent?

Answer 1

The number 0.02 in the expression \( 800(1 + 0.02)^t \) represents the annual interest rate expressed as a decimal. In this case, it corresponds to a 2% interest rate. This means that each year, the account earns 2% interest on the current balance.