Question

Question 1

A bank account that earns 1% interest each month has

a balance of $1,500. Any interest is deposited into the

account, and no further deposits or withdrawals are

made.

Noah thinks that after two months the balance will be

$1,530 because 2% of 1,500 is 30.

Do you agree with Noah? Explain your reasoning,

Answer 1

I do not agree with Noah.

Explanation:

A bank account that earns 1% interest each month has a balance of $1,500.

Now, any interest is deposited into the account, and no further deposits or withdrawals are made.

So, we can assume that the interest is compounded every month.

Therefore, after 2 months the balance in the account will be

`1500(1 + (1)/(100))^(2) = 1530.15` dollars.

If the interest was to be applicable in simple interest then the balance in the account after 2 months would have been $1530.

Therefore, I do not agree with Noah. (Answer)