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Assume that it is now january 1, 1997. On january 1, 1998, you will deposit $1,000 in to a savings account that pays 8 percent.

a) If the bank compounds interest annually, how much will you have in your account on january 1, 2001?

b) What would your january 1, 2001, balance be if the bank used quarterly compounding rather than annual compounding?

c) Suppose you deposited the $1,000 in 4 payments of $250 each on january 1rst of 1998, 1999, 2000, and 2001. How much would you have in your account on january 1, 2001, based on 8% annual compounding?

d) Suppose you deposited 4 equal payments in your account on january 1rst of 1998, 1999, 2000, and 2001. 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 calculated in part a)?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92167350

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