Interactive practice questions
A deposit of $\$5000$$5000 is made on June 1, 2006 into an investment account and a deposit of $\$400$$400 is made each year on May 31.
The balance at the end of each $12$12-month period for this investment, where interest is compounded annually, is given by $A_n=1.05A_{n-1}+400$An=1.05An−1+400, and
$A_0=5000$A0=5000.
State the annual interest rate.
Determine the balance on June 1, 2007.
Determine the value of the investment on June 1, 2013.
Give your answer to the nearest cent.
Mr Smith opened a bank account for his granddaughter Avril on the day she was born: January 5, 2006. He deposited $\$4000$$4000.
Mrs Smith, Avril’s grandmother, also deposited money into this account on that day, and continues to do so by depositing $\$400$$400 every $3$3 months.
The balance at the end of each quarter for this investment, where interest is compounded quarterly, is given by $A_n=1.03A_{n-1}+400$An=1.03An−1+400, $A_0=4400$A0=4400.
Bill opens an account to help save for a house. He opens the account at the beginning of 2013 with an initial deposit of $\$40000$$40000 that is compounded annually at a rate of $3.7%$3.7% per annum. He makes further deposits of $\$1000$$1000 at the end of each year.
Sandy opens a savings account to motivate herself to save regularly. She opens the account at the start of September, 2013 with the intention of making regular deposits of $\$110$$110 at the end of each month. The interest rate for this account is $24%$24% per annum which compounds at the end of each month.