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22 February, 00:26

Izumi deposits $325 in an account that pays 6% interest compounded monthly. Izumi incorrectly claims that the account balance will be $670 after 1 year. What will be the account balance after 1 year. What error did Izumi likely make?

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  1. 22 February, 00:55
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    Amount after one year = $410

    Error made = $260

    Step-by-step explanation:

    Number of quarters in one year = four quarters

    Hence amount after one year = P (1+r) ⁴

    A = 325 (1+0.06) ⁴ = $410

    Error made = 670 - 410 = $260
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