Suppose a certain amount of money is deposited into an account paying 4% annual

Question

Suppose a certain amount of money is deposited into an account paying 4% annual interest, compounded quarterly (i.e., four times a year). For each positive integer n, let Sn = the amount on deposit at the end of the nth quarter, and let S0 be the initial amount deposited.

The recurrence relation for S0, S1, S2, . . ., assuming no additional deposits or withdrawals for a 3-year period is the following:

If Sk is the amount on deposit at the end of the kth quarter, then
Sk = Sk-1 = 1 + (0.01)Sk-1 = (1 + 0.01) Sk-1 = (1.01) Sk-1 for each integer k 1.

True

False

Explanation / Answer

True

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