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 would you have in your account in four years when the last deposit is made assuming that interest is 8 percent compound annually?

d. Suppose you deposited four equal payments in your account beginning next January 1, assuming an 8 percent interest rate, how large would each of your payments have to be for you to obtain the same ending balance as you calculating in part a?

Expert Solution

jeff jeffy answered 3 months ago

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