Exponential growth
Exponential Growth of an Investment
The estimated annual value increase of an investment is percent. The value of the initial investment was , and after years the value is , where is a constant. Which of the following is closest to the value of ?
Solution:
According to the problem, the initial value is , and it increases by percent each year. Hence, after one year, the value is
Similarly, after two years, the value is
Furthermore, after years, the value is
According to the problem, the value of the investment is after years. Let’s solve for .
We can see that