Question

Izumi deposits $325 in an account that pays 6% interest compounded monthly. Izumi incorrectly claims that the account balance will be $670 after 1 year.What will be the account balance after 1 year. What error did Izumi likely make?

Answer 1

Answer:

Amount after one year = $410

Error made = $260

Step-by-step explanation:

Number of quarters in one year = four quarters

Hence amount after one year = P(1+r)⁴

A = 325(1+0.06)⁴ = $410

Error made = 670 - 410 = $260