Question

Determine the amount of money in a savings account at the end of 10 years, given an initial deposit of $10,500 and a 8 percent annual interest rate when interest is compounded: Use Appendix A for an approximate answer, but calculate your final answer using the formula and financial calculator methods. Future Value a. Annually b. Semiannually c. Quarterly

Answer 1

To calculate the future value of a savings account, we can use the formula:

FV = PV x (1 + r/n)^(n*t)

where:

- FV is the future value of the savings account

- PV is the present value (or initial deposit) of the savings account

- r is the annual interest rate (as a decimal)

- n is the number of times the interest is compounded per year

- t is the number of years

a. Annually:

FV = 10,500 x (1 + 0.08/1)^(1*10) = $22,680.00

b. Semiannually:

FV = 10,500 x (1 + 0.08/2)^(2*10) = $23,028.00

c. Quarterly:

FV = 10,500 x (1 + 0.08/4)^(4*10) = $23,263.22

Therefore, at the end of 10 years, the amount of money in a savings account with an initial deposit of $10,500 and an 8 percent annual interest rate when interest is compounded annually is $22,680.00; when interest is compounded semiannually is $23,028.00; and when interest is compounded quarterly is $23,263.22.

Step-by-step explanation:

I hope this helps