Question

Future 0.23 Suppose that you deposit $1,000 into a savings account that pays 8 percent. a If the bank compounds interest annually, how much will you have in your account in four years? b. What would your balance be in four years if the bank used quarterly com- pounding rather than annual compounding? C. Suppose you deposited the $1,000 in four payments of $250 each year beginning one year from now. How much would you have in your account after you make the final deposit, based on 8 percent annual compounding? d. Suppose you deposited four equal payments in your account beginning one year from today. If you can invest your money at an 8 percent interest rate, how large would each of your payments have to be for you to obtain the same ending balance as you calculated in part (a)?

Answer 1

a	Amount after 4 years	$1,360.49
b	Amount after 4 years	$1,372.79
c	Amount after 4 years	$1,126.53
d	Payments required	$301.92

Workings

Book1- Excel AutoSave Oi Sign in O Tell me what you want to do Comments Share File Home Formulas Review View Help Insert Draw Page Layout Data Σ X Insert A A Calibri 11 General Delete Sort & Find & Filter Select Conditional Format as Cell Paste в I A B I U E- EE Format T T Formatting Table Styles Clipboard Alignment Number Styles Cells Editing Font г. Amount after 4 years C2 T A C D E F G Amount after 4 years =FV(8%,4,, -1000) 2 a Amount after 4 years =FV(8%/4,4 4,, -1000) b 4 5 Amount after 4 years =FV(8%,4,-250) 6 C 7 =PMT(8%,4,-D2) d 8 Payments required 9 10 11 12 13 14 15 16 17 Sheet1 Sheet4 Sheet2 Sheet5 Sheet3 Sheet7 Sheet8 +100 % Ready w ENG P3 (? 7:25 AM