If $1 Is Invested in an Account Over a 10-Year

question 131

Multiple Choice

If $1 is invested in an account over a 10-year period, the amount in the account, where t represents the time in years, is given by depending on whether the account pays simple interest at or continuous compound interest at 7%.Graph each function on the same set of axes.Which grows at a higher rate? ​

• A)​
• B)​
• C)​ ​
• D)​

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Definitions:

Average Accounting Rate of Return

A financial ratio that measures the expected return on an investment based on its net income and initial cost.

Straight-Line Depreciation

An arrangement for allocating the cost of a tangible asset over its duration of usefulness in identical annual segments.

Discount Rate

The interest rate charged to commercial banks and other depository institutions by the central bank for loans received from the central bank's discount window; it is also used in discounted cash flow analysis to determine the present value of future cash flows.

Payback Period

The duration required for an investment to recoup its initial outlay in terms of profits or savings.