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# Of the following four types of savings account plans, which option would yield e...

### Question

Of the following four types of savings account plans, which option would yield exponential growth of the money in the account?

### Options

A)
Each successive year, 2% of the initial savings is added to the value of the account.
B)
Each successive year, 1.5% of the initial savings and $100 is added to the value of the account. C) Each successive year, 1% of the current value is added to the value of the account. D) Each successive year,$100 is added to the value of the account.

The correct answer is C.

### Explanation:

Choice C is correct. Linear growth is characterized by an increase of a quantity at a constant rate. Exponential growth is characterized by an increase of a quantity at a relative rate; that is, an increase by the same factor over equal increments of time. In choice C, the value of the account increases by 1% each year; that is, the value is multiplied by the same factor, 1.01, each year. Therefore, the value described in choice C grows exponentially.

Choices A and B are incorrect because the rate depends only on the initial value, and thus the value increases by the same amount each year. Both options A and B describe linear growth. Choice D is incorrect; it is also a description of linear growth, as the increase is constant each year.