# What type of function should be used to model the interest on a bank account?

##### 1 Answer

Jul 6, 2015

Exponential function

#### Explanation:

Banks generally pay compound interest on deposits on yearly basis. To calculate the interest accrued over a period of time, Amount is first calculated using an exponential function, A=P(1+r/n)^nt, where n is the number of times interest is compounded during a year. If n=1, as is generally , in the case of bank accounts, A= P(1+r)^t where t is the period in years.