Question

Consider a $2,900 deposit earning 8 percent interest per year for five years. What is the future value? (Do not round intermediate calculations. Round your answer to 2 decimal places.) How much total interest is earned on the original deposit?

Answer 1

The future value of a $2,900 deposit at 8 percent interest per year for five years is $4260.86. The total interest earned on the deposit is $1360.86.

Step-by-step explanation:

To calculate the future value of a $2,900 deposit earning 8 percent per year for five years, we can use the formula for compound interest which is:

A = P(1 + r/n)ⁿ⁺

Where:

• P is the principal amount ($2,900),
• r is the annual interest rate (0.08),
• n is the number of times that interest is compounded per year (which is 1 for annual compounding), and
• t is the time in years (5 years).

Plugging in the values:

A = 2900(1 + 0.08/1)¹ˣ⁵ = 2900(1.08)⁵

Using a calculator to compute this:

A = 2900 * 1.46933 = $4260.86 (rounded to two decimal places)

The future value of the deposit is $4260.86.

To find out how much total interest is earned, we subtract the original deposit from the future value:

Total Interest = A - P = $4260.86 - $2900 = $1360.86

So, the total interest earned on the original deposit after five years is $1360.86.

Answer 2

future value = $4,261.05

total interest is earned = $1,361.05

Step-by-step explanation:

given data

deposit = $2900

interest rate = 8 % = 0.08

time = 5 year

solution

we get here first future value that is express as

future value = present value ×
`(1+r)^(t)` .............................1

put here value and we get

future value = $2900 ×
`(1+0.08)^(5)`

solve it we get

future value = $4,261.05

and

total interest is earned on the original deposit will be here

total interest is earned = $4261.05 - $2900

total interest is earned = $1,361.05