BUSINESS, FUR1 2003 VCAA 6 MC

Interest is paid monthly into an account at a rate of `text(3%)` per annum. Each month, immediately after the interest is paid, the account is debited `$5` in fees. No other transactions take place. The initial amount of money in the account is `$12\ 200`.
After all interest has been paid and fees debited, the balance in the account at the end of two months is

A. $12 251.06

B. $12 261.08

C. $12 271.09

D. $12 932.83

E. $12 953.13

Show Answers Only

`A`

Show Worked Solution

`text(Interest rate/month) = 3/12 % = text(0.25%)`

`text(Using)\ \ A = PR^n`

`text(After 1 month)`

`A_1`	`= 12200(1 + 0.25/100) − 5`
	`= 12200(1.0025) − 5`
	`= 12225.5`

`text(After 2 months)`

`A_2`	`= 12225.5(1.0025) − 5`
	`= 12251.0638`
	`= $12251.06`

`=> A`