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Jonathan deposits $2000 into a bank account that pays 7% annual interest compounded annually. This means the bank pays him 7% of his account balance as interest at the end of each year, and he leaves the original amount and the interest in the account.
1. Write a recursive formula to model the situation described above. Use A0 to represent the initial amount invested. Then describe An, the next year’s balance, in terms of the current year’s balance, An-1.

Respuesta :

CastleRook
For us to get the formula that models the above statement, we shall use the formula for compound interest. Compound interest is given by:
A=p(1+r/100)^n
where;
A=future amount=An
p=current amount=A0
r=rate=7%
n=time= 1 year
thus rewriting our formula we shall have:
An=A0(1+r)^n
The above is the model describing the information given for future cash flow;
hence, the amount in 1 year will be:
An=A0(1+0.07)^1
An=2000(1.07)^1
An=$2,140

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