Question

You recently received an unexpected monetary gift of $3,000. Because you took College Algebra, you know that investing this money in a good bank account will allow your money to grow exponentially. After visiting several banks in the Allendale area, you have narrowed it down to two options.

Option 1: At Lake Michigan Credit Union your money will earn interest rate of 2.05% per year, compounded monthly. Call the function that models this situation L(t).

Option 2: At Macatawa Bank your money will earn interest at a rate of 1.05 % per year, compounded continuously. Call the function that models this situation M(t).

1. Where should you invest your money if you plan to withdraw it in 5 years?

2. How long will the money need to stay in each account in order for the amount to double?

3. Compare the graphs of each model. What are the similarities? Differences? Explain the similarities and differences in the context of the situation. A good response will address intercepts, horizontal asymptotes and growth rates in a graphical sense and within the context.

4. Find the value of L-1(4000) and explain the meaning in the context of the situation.

Answer 1