Question

In: Accounting

On January 1, 2016, you deposited $5,300 in a savings account. The account will earn 9...

On January 1, 2016, you deposited $5,300 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 Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) (Use appropriate factor(s) from the tables provided. Round your final answers to 2 decimal places.) 2. What is the total interest for the 7 years? (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) (Use appropriate factor(s) from the tables provided. Round your final answers to 2 decimal places.) 3. How much interest revenue did the fund earn in 2016 and in 2017? (Round your final answers to 2 decimal places.)

Solutions

Expert Solution

Solution 1: Calculation of the Future Value of $5300 after 7 years at an annual interest rate of 9%.

Future Value = Present Value (1 + r)^t

Where, r = Annual interest rate
t = Number of years

Therefore,Future Value of $5300 = 5300 (1.09)^7

= 5300 * 1.8280

=$9688.61

The  Future Value of $5300 after 7 years at an annual interest rate of 9% is $9688.61.

Solution 2: Calculation of the total Interest for 7 years.

Total Interest for 7 years = Maturity Amount - Amount Deposited

= $9688.61 - $5300

= $4388.61

Solution 3: Calculation of Interest revenue for the year 2016 and 2017

Year Opening Balance Interest = 0.09 * Opening Balance Closing Balance = Opening Balance + Interest
2016 5,300.00 477.00 5,777.00
2017 5,777.00 519.93 6,296.93
2018 6,296.93 566.72 6,863.65
2019 6,863.65 617.73 7,481.38
2020 7,481.38 673.32 8,154.71
2021 8,154.71 733.92 8,888.63
2022 8,888.63 799.98 9,688.61

Therefore, the interest income for the year 2016 is $477 and for the year 2017 is $519.93


Related Solutions

On January 1, 2016, you deposited $6,400 in a savings account. The account will earn 10...
On January 1, 2016, you deposited $6,400 in a savings account. The account will earn 10 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 Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) (Use appropriate factor(s) from the tables provided. Round your final answers...
On January 1, 2018, you deposited $5,200 in a savings account. The account will earn 10...
On January 1, 2018, you deposited $5,200 in a savings account. The account will earn 10 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? 2. What is the total interest for the 7 years? 3. How much interest revenue did the fund earn in 2018 and in 2019?
1) Suppose you deposited $10,000 into a savings account today. The account pays a nominal annual...
1) Suppose you deposited $10,000 into a savings account today. The account pays a nominal annual interest rate of 12%, but interest is compounded quarterly. Assuming that you make no additional deposits into or withdrawals from the account, what will your ending balance be 10 years from today? 2) A firm expects to pay dividends at the end of each of the next four years of $2.00, $2.50, $2.50, and $3.50.  If growth is then expected to be constant at 8...
On January 1, $5000 is deposited into a high-interest savings account that pays 8% interest compounded annually.
On January 1, $5000 is deposited into a high-interest savings account that pays 8% interest compounded annually. If all the money is withdrawn in 5 equal end-of-year sums beginning December 31 of the first year, how much will each withdrawal be?
Suppose that today (January 1) you deposited $1000 into a savings that pays 8 percent. a....
Suppose that today (January 1) you deposited $1000 into a savings that pays 8 percent. a. If the bank compounds interest annually, how much will you have in your account three years from today? b. What would your balance be in three years if the bank used quarterly compounding rather than annual compounding? c. Suppose you deposited the $1000 in four payments of $250 each on January 1 of the next four years, beginning one year from today. How much...
If $30,000 is deposited in a savings account at the end of each year and the...
If $30,000 is deposited in a savings account at the end of each year and the account pays interest of 5% compounded annually, what will be the balance of the account at the end of 10 years?
A year ago, you deposited $30,000 into a retirement savings account at a fixed rate of...
A year ago, you deposited $30,000 into a retirement savings account at a fixed rate of 5.5 percent. Today, you could earn a fixed rate of 6.5 percent on a similar type account. However, your rate is fixed and cannot be adjusted. How much less could you have deposited last year if you could have earned a fixed rate of 6.5 percent and still have the same amount as you currently will when you retire 38 years from today?
1. One year ago, XYZ deposited $5,400 in an account that has earned and will earn...
1. One year ago, XYZ deposited $5,400 in an account that has earned and will earn 12.3% per year in compound interest. If PQR deposits $8,700 in an account in 3 years from today that earns simple interest, then how much simple interest per year must PQR earn to have the same amount of money in 7 years from today as XYZ will have in 7 years from today? Answer as an annual rate. A. A rate less than 6.00%...
An amount of $10,000 is deposited into a savings account that pays interest at a rate...
An amount of $10,000 is deposited into a savings account that pays interest at a rate of 7%. If 10 equal annual withdrawals are made from the account starting one year after the money was deposited, how much can be withdrawn so that in the fifth year one would be able to withdraw an additional $1,000 and the account would be depleted after 10 years? Explain verbally in detail and sketch a timeline to illustrate.
6.Suppose that you had savings deposited in an account at an interest rate of 5 percent...
6.Suppose that you had savings deposited in an account at an interest rate of 5 percent and your father told you that he earned 10 percent interest 20 years ago. Which of you was getting the better return? How would your answer change if you were told that the inflation rate in the United States was 12 percent 20 years ago and is 3 percent now? 7.Suppose you have $1,000, which you can put in two different types of accounts...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT