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On January 1, 2021, you deposited $5,600 in a savings account. The account will earn 9 percent annual compound interest, which will be added to the fund balance at the end of each year.

Required:
1. What will be the balance in the savings account at the end of 7 years? (Future Value of $1. Present Volue of S1. Euture Value Annuily of S1. Present Value Annulyy of 51.) Note: Use appropriate factor(s) from the tables provided.
2. What is the total interest for the 7 years? (Euture Value of $1. Present Value of 51 . Euture Value Annulfy of S11. Present Volus Annuity of $11.) Note: Use appropriate factor(s) from the tables provided.
3. How much interest revenue did the fund earn in 2021 and in 2022?

User Ayfer
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Answer:You deposited \$5,600 in a savings account on January 1, 2021. The account will earn 9% annual compound interest, which will be added to the fund balance at the end of each year.

Required

What will be the balance in the savings account at the end of 7 years?

What is the total interest for the 7 years?

How much interest revenue did the fund earn in 2021 and in 2022?

Solution

1. Balance in the savings account at the end of 7 years

The balance in the savings account at the end of 7 years can be calculated using the future value of an annuity formula:

FV = PV * (1 + r)^n

where:

FV is the future value

PV is the present value (in this case, \$5,600)

r is the interest rate (9%)

n is the number of years (7)

Plugging in these values, we get:

FV = 5600 * (1 + 0.09)^7 = \\$11,542.32

2. Total interest for the 7 years

The total interest for the 7 years can be calculated by subtracting the present value from the future value:

Interest = FV - PV = \\$11,542.32 - \\$5,600 = \\$5,942.32

3. Interest revenue in 2021 and 2022

The fund earned \$504 in interest revenue in 2021 and \$938.32 in interest revenue in 2022.

The interest revenue in 2021 can be calculated as follows:

Interest = (Balance * r) = (5600 * 0.09) = \\$504

The interest revenue in 2022 can be calculated as follows:

Interest = (Balance * r) = (6,104 * 0.09) = \\$938.32

Therefore, the total interest revenue for the 7 years was \$504 + \$938.32 = \$5,942.32.

Conclusion

At the end of 7 years, the balance in the savings account will be \$11,542.32. The total interest for the 7 years will be \$5,942.32. The fund earned \$504 in interest revenue in 2021 and \$938.32 in interest revenue in 2022.

Step-by-step explanation:

User Greg Soltis
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