Multiple choice

Michael invests $800 in a savings account that earns 3.5% interest compounded annually. He uses the expression 800(m)x to find the value of his investment after x years. What is the value of m in the above expression?

  1. 13.5

  2. 10.35

  3. 1.35

  4. 1.035

  5. 1.0035
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D Correct answer
Explanation

The formula for annual compound interest is A = P(1 + r)^x. Here, r = 3.5% = 0.035. So, the base m = 1 + 0.035 = 1.035.

AI explanation

In the standard compound interest formula Amount = Principal x (1 + Rate/100)^Time, the term (1 + Rate/100) represents the growth multiplier m. For an interest rate of 3.5%, this multiplier is 1 + 3.5/100, which equals 1.035.

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