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Financial Maths, STD2 F5 2020 HSC 34

Tina inherits $60 000 and invests it in an account earning interest at a rate of 0.5% per month. Each month, immediately after the interest has been paid, Tina withdraws $800.

The amount in the account immediately after the `n`th withdrawal can be determined using the recurrence relation

`A_n = A_(n - 1)(1.005) - 800`,

where `n = 1, 2, 3, …`  and  `A_0 = 60\ 000`

  1. Use the recurrence relation to find the amount of money in the account immediately after the third withdrawal.  (2 marks)

  2. Calculate the amount of interest earned in the first three months.  (2 marks)

Show Answers Only
  1. `$58\ 492.49`
  2. `$892.49`
Show Worked Solution

♦ Mean mark part (a) 41%.
a.    `A_1` `= 60\ 000(1.005) – 800 = $59\ 500`
  `A_2` `= 59\ 500(1.005) – 800 = $58\ 997.50`
  `A_3` `= 58\ 997.50(1.005) – 800 = $58\ 492.49`

 

b.   `text{Amount (not interest)}`

♦♦ Mean mark part (b) 33%.

`= 60\ 000 – (3 xx 800)`

`= $57\ 600`
 

`:.\ text(Interest earned in 3 months)`

`= A_3 – 57\ 600`

`= 58\ 492.49 – 57\ 600`

`= $892.49`