Question

A customer deposits $1,000 in an account in which the interest is compounded annually. The table below shows the balances in the account at the end of each year.

Amount in Account vs. Number of Years
Amount in Account, A
Number of Years After Initial Deposit, t
1,000
0
1,080
1
1,166.40
2
1,259.71
3
1,360.49
4

Which equation best represents the data in the table?
A = 1000 (1.08) Superscript t
A = 1080 Superscript t
A = 1000 (1.8) Superscript t
A = 800 Superscript t

Answer 1

A = 1000(1.08)^t

Reason: The principal is $1000 and it grows 8% per year, so the annual growth factor is 1.08. For example, 1000(1.08)^2 = 1166.40 matches the table.