Answer:
Exponential model best fits this situation.
Step-by-step explanation:
Given : Karl has $400 in a savings account. The interest rate is 10%, compounded annually.
We have to determine which type of model best fits this situation.
Since, interest is calculated compounded
Using formula for compounded interest , we have,
[tex]A=P(1+r)^n[/tex]
Where P is principal amount
n is time period
r is interest rate
We are given P = $ 400
and r = 10 % = 0.10
Substitute, we have,
[tex]A=400(1+0.10)^n[/tex]
[tex]A=400(1.10)^n[/tex]
Now this is an equation of the form [tex]a^x[/tex] which is exponential function.
So, exponential model best fits this situation.
