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 $2,162.00 is made to the account with a monthly service fee of 1%, what will be the value of B after 18 months? Round to the nearest cent.
A) $2,586.07
B) $1,772.84
C) $1,804.22
D) $1,822.44

Answer 1

To calculate the value of B after 18 months, use the formula provided in the question: B = I * (1 - f)^n, where I is the initial deposit, f is the monthly service fee, and n is the number of months. Plugging in the given values, the answer is $1,804.22.

Therefore, the correct answer is C) $1,804.22.

Step-by-step explanation:

To calculate the value of B after 18 months, we need to use the formula provided in the question. The formula states that 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.

In this case, the initial deposit is $2,162.00, the monthly service fee is 1%, and the number of months is 18.

Using the formula, B = I * (1 - f)^n, we plug in the values:

B = $2,162.00 * (1 - 0.01)^18

Calculating this expression, we find that the value of B is approximately $1,804.22.

Therefore, the correct answer is C) $1,804.22.