Suppose you deposit $1,500 in a savings account that pays interest at an annual rate of 5%. If no money is added or withdrawn fr
1 answer:
Answer:
The solution is given below.
Step-by-step explanation:
Given that
Deposited amount = $1,500
Rate of interest = 5%
We need to find out the following things
a. The account after 4 years i.e. future value
As we know that
Future value = Present value × (1 + rate)^time period
Future value = $1,500 × (1 + 0.05)^4
Future value = $1,500 × (1.05)^4
Future value = $1,823.26
b. The account after 16 years i.e. future value
As we know that
Future value = Present value × (1 + rate)^time period
Future value = $1,500 × (1 + 0.05)^16
Future value = $1,500 × (1.05)^16
Future value = $3,274.312
c. The number of years that contain the amount of $2,000
Here
PV = $1,500
FV = $2,000
PMT = $0
RATE = 5%
The following formula should be applied
= NPER(RATE;PMT;-PV;FV;TYPE)
After applying the above formula, the time period is 4.94 years
d. The number of years that contain the amount of $2,500
Here
PV = $1,500
FV = $2,000
PMT = $0
RATE = 5%
The following formula should be applied
= NPER(RATE;PMT;-PV;FV;TYPE)
After applying the above formula, the time period is 8.77 years
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