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: