Question

Leticia invests $200 at 5% interest. If y represents the amount of money after x time periods, which describes the graph of the exponential function relating time and money?

The initial value of the graph is 200. The graph increases by a factor of 1.05 per 1 unit increase in time.
The initial value of the graph is 200. The graph increases by a factor of 5 per 1 unit increase in time.
The initial value of the graph is 500. The graph increases by a factor of 2 per 1 unit increase in time.
The initial value of the graph is 500. The graph increases by a factor of 1.02 per 1 unit increase in time.

Answer 1

The first choice.

Since the principal is 200 and the interest rate is 5% per period, the amount after x periods is
y = 200(1.05)^x,
so the initial value is 200 and the graph multiplies by 1.05 for each 1-unit increase in time.