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.)

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

ekkarill92 answered 1 year ago

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