Question

A savings account was opened with an initial deposit and never touched again. An account that does not meet the minimum balance requirement is charged a service fee.

Assuming the account was open with an initial deposit below the minimum amount, the current account balance, B, is equal to the product of the initial deposit, I, and the quantity of the difference of 1 and the monthly service fee, f, raised to the power of n, the number of months since the account was open.

If an initial deposit of $2,713.00 is made to the account with a monthly service fee of 5%, what will be the value of B after 13 months? Round to the nearest cent.

Answer 1

The equation we're given looks like:
$B=I(1-f)^n$
Substituting the information we're given, we have:
$B=2713(1-0.05)^1^3$
This is the same as:
$B=2713(0.95)^1^3$
which gives us an answer of $1392.70.