As their business grows, Jane and Michael decide to invest some of their earnings.
They each choose a different investment strategy.
Jane opens an account with Red Bank, with an initial deposit of $4000.
Interest is calculated at a rate of 3.6% per annum, compounding monthly.
- Determine the amount in Jane’s account at the end of six months.
Write your answer correct to the nearest cent. (1 mark)
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Michael decides to open an account with Blue Bank, with an initial deposit of $2000.
At the end of each quarter, he adds an additional $200 to his account.
Interest is compounded at the end of each quarter.
The equation below can be used to determine the balance of Michael’s account at the end of the first quarter.
account balance = 2000 × (1 + 0.008) + 200
- Show that the annual compounding rate of interest is 3.2%. (1 mark)
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- Determine the amount in Michael’s account, after the $200 has been added, at the end of five years.
Write your answer correct to the nearest cent. (1 mark)
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