Question

You have 2000 invested in a bank X earning 5% effective annual interest. At the end of each year, you withdraw that year’s interest in addition to 100 from bank X and deposit both in bank Y, which earns 6% effective annual interest. How much is in bank Y at the end of the 20 years?

Answer 1

Anwes mom Fuery year interest from Bank * = 2000 x5 %. » 4100 Additional amount, will deposit in bank y = 4100 Total amount, will depont in bank y = $200 Calculation of bank balance of bank y' at the end of 20 year, when the effective annual rate will be bY. Future value of annuit ex l (lt nate)"_1] L nate = $200 xr (1+0.06) 20_17 L 0.06 = $200 * 3.2071-1) 0.06 - $200 x 2:2071 - $7357 1. So, $ 7357, is in bank at the end of the year 20. CScanned with CamScanner 0106