Compute y = 100*(1.05)^t for t = 2.

• A. 105
• B. 110.25
• C. 101.0
• D. 111.5

Answer: (B)

Exponential growth with a constant multiplier per time unit is at work here. The expression 100*(1.05)^t means you start with 100 and multiply by 1.05 for each unit of time. After two units of time, you apply the multiplier twice: y = 100*(1.05)(1.05) = 1001.1025 = 110.25. So the value is 110.25, which is the result you get when t = 2. The other options correspond to either applying the growth once (105), a smaller or larger miscalculation (101.0 or 111.5), rather than applying the 5% increase twice.