The growth amount is given by the growth rate the duration of the growth
and how the rate is applied to each period.
The correct selections are;
Reasons:
First part;
The given formula for the annual growth rate is; [tex]A(t) = \mathbf{P \cdot \left(1 + r)^t}[/tex]
[tex]\displaystyle A(t) = \mathbf{P \cdot \left (1 + \frac{r}{[a]} \right)^{n \cdot t}}[/tex]
Where;
P = The principal
r = The rate per period
n = The number of compounding per period
t = The number of periods
In the above formula, we have that the number of compounding per periods = n
Therefore;
Which gives the fraction of the interest applied to each period as [tex]\displaystyle \frac{r}{n}[/tex]
Which gives;
[tex]\displaystyle A(t) = \mathbf{P \cdot \left (1 + \frac{r}{n} \right)^{n \cdot t}}[/tex]
Second part;
When [tex]x = \displaystyle \frac{n}{r}[/tex], we have; [tex]A(t) = \mathbf{P \cdot \left(1 + [b])^{n \cdot t}}[/tex]
[tex]\displaystyle A(t) = P \cdot \left (1 + \frac{r}{n} \right)^{n \cdot t}[/tex]
Therefore;
[tex]\displaystyle b=\frac{r}{n}[/tex]
[tex]\displaystyle \frac{1}{x} = \frac{1}{\left(\frac{n}{r} \right)} =\frac{r}{n}[/tex]
Which gives;
[tex]\displaystyle b=\frac{r}{n} = \mathbf{\frac{1}{x}}[/tex]
[tex]\displaystyle \underline{ b = \frac{1}{x} }[/tex]
Third part;
Where, n = x·r, and [tex]\displaystyle A(t) = \mathbf{P \cdot \left (1 + \frac{1}{x} \right)^{[c] \cdot t}}[/tex]
We have;
[tex]\displaystyle x= \frac{n}{r}[/tex]
[tex]\displaystyle \frac{1}{x}=\frac{r}{n}[/tex]
[tex]\displaystyle A(t) = P \cdot \left (1 + \frac{1}{x} \right)^{[c] \cdot t} = \mathbf{P \cdot \left (1 + \frac{r}{n} \right)^{[c] \cdot t}}[/tex]
Which gives;
c = n = x·r
Fourth part;
If x is a really large number, we have; [tex]\displaystyle \mathbf{\left(1 + \frac{1}{x} \right)^x}[/tex]
Where x approaches ∞, we have;
[tex]\displaystyle \frac{1}{\infty}=0[/tex]
Which gives;
[tex]\displaystyle \displaystyle \left(1 + \frac{1}{x} \right)^x= \left(1 + \frac{1}{\infty} \right)^\infty = \displaystyle \left(1 + 0\right)^\infty = 1 ^\infty = 1[/tex]
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