Question

On the day Harry was born, his parents put $1200 into an investment account that promises to pay a fixed interest rate of 6 percent per year. How much money will Harry have in this account when he turns 21 (round to nearest $1)? If you could identify the TVM variable you're calculating, along with showing me how to calculate this step by step using excel it would be extremely helpful

Answer 1

There will be $2712 in Harry's account after 21 years.

Explanation:

The initial amount put into the investment account was $1200. This account has an interest rate of 6% every year. This means that for every year that money is kept in this account, the bank must pay them 6%. To do this we must calculate how much 6% of $1200 is

6% of $1000 is 0.06 * $1000 =$72.

So for every year, the interest of $72 is added into the account. To calculate total interest we multiply this interest amount and the number of years.

So after 21 years= $72 * 21 years = $1512.

So interest gained in 21 years is $1512 but this is only the interest amount. We must add the initial amount with this to find the total amount available in the account.

Total amount present= Inital amount + Amount due to interest= $1200 + $1512= $2712.