Question

You deposit $1500 in a stock account. The account starts losing 2.6% interest annually. How must money do you have after 2 years when the market starts increasing again?

*Need the equation and solution PLEASE*

Answer 1

Answer: $1,423.014

Explanation:

Hi, to answer this question we have to apply the next formula:

A = P (1 - r) t

Where:

A = Future value of investment

P = Principal Amount

r = Annual Nominal Interest Rate decrease (decimal form)

t= years

Replacing with the values given

A = 1500 ( 1- 2.6/100)^2

A = 1500 ( 1-0.026)^2

A= 1500 ( 0.974)^2

A = $1,423.014

Feel free to ask for more if needed or if you did not understand something.

Answer 2

Answer: M(2) = $1500*(1 - 0.026)^2 = $1423.01

Explanation:

Initially in the acount there is $1500

You lose a 2.6% (or 0.026 in decimal form) per year, so after the first year you have:

M = $1500 - 0.026*$1500 = $1461

After other year, you lose oter 2.6%

M = $1461 - 0.026*$1461 = $1423.01

The equation can be writen as:

M(t) = $1500*(1 - 0.026)^t

Where t is the number of years, you can use t = 2 and get:

M(2) = $1500*(1 - 0.026)^2 = $1423.01