Question

Fred purchased $100 worth of stock in his favorite tech company. Last year, the stock increased by 12%. Assuming it continues to increase by 12% each year, you can use a function to describe the value of Fred's stock x years after he bought it.
Is the function linear or exponential? make an equation that best represents the function

Answer 1

The function is exponential (growth by a fixed percent each year).

Value after x years: V(x) = 100(1.12)^x.

(Here x is the number of years after purchase. For example, after 1 year V(1)=100(1.12)=\$112 and after 5 years V(5)=100(1.12)^5 ≈ \$176.23.)