Money in a savings account earns compound interest at a rate of \(1.75 \%\) per
year. The amount, \(A,\) of money in an account can be modelled by the
exponential function \(A=P(1.0175)^{n}\) where \(P\) is the amount of money first
deposited into the savings account and \(n\) is the number of years the money
remains in the account.
a) Graph this function using a value of \(P=\$ 1\) as the initial deposit.
b) Approximately how long will it take for the deposit to triple in value?
c) Does the amount of time it takes for a deposit to triple depend on the
value of the initial deposit? Explain.
d) In finance, the rule of 72 is a method of estimating an investment's
doubling time when interest is compounded annually. The number 72 is divided
by the annual interest rate to obtain the approximate number of years required
for doubling. Use your graph and the rule of 72 to approximate the doubling
time for this investment.