Question

1. Frank makes deposits into his savings account of $225 at the beginning of every three months. Interest earned by the deposits is 3% compounded quarterly. (a) What will the balance in Frank's account be after eight years? (b) How much of the balance will Frank have contributed? (c) How much of the balance is interest? (a) The balance in Frank's account will be $ (Round the final answer to the nearest cent as needed. Round all intermediate values to six decimal places as needed.) (b) Frank will have contributed $ (Round the final answer to the nearest cent as needed. Round all intermediate values to six decimal places as needed.) (c) The amount of interest is $ (Round the final answer to the nearest cent as needed. Round all intermediate values to six decimal places as needed.) 2. For the following annuity due, determine the nominal annual rate of interest. Future Value Term Present Value Periodic Rent $540 Payment Period Conversion Period monthly $2,581 1 year 4 years %. The nominal annual rate of interest is (Round to two decimal places as needed.)

Answer 1

Ques-1)

Periodic deposit in savings Account at the beginning of each Quarter = $225

calculating the Future Value at the end of 8 yaers using Future value of Annuity Due formula:-

Where, C= Periodic Deposit = $225

r = Periodic Interest rate = 3%/4 =0.75%

n= no of periods =8yrs*4 = 32

Future Value = $8164.11

So, The Balance in Frank's account will be $8164.11

b). Amount Fran contributed in the Balance = Quarterly Deposits*No of Deposits

= $225*32

= $7200

c). Interest earned in Balance = Future Value - Contribution by Frank

= $8164.11 - $7200

= $964.11

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