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    Annually Compound Interest

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    1. Joe deposited $25,000 in Bank 1. Bank 1 pays 9% interest compounded annually. How much will Joe have in his account after 10 years? Show your work.

    2. Mr. Smith wants to buy his son a car in 3 years. The cost of the car is $20,000. Assuming a bank savings rate of 12% compounded quarterly, how much must Mr. Smith put in his bank account today?

    3. You decide to invest $7,500 quarterly for 10 years in an ordinary annuity at 8% compounded quarterly. What will be the value of your annuity after 10 years

    4. You would like to receive payments of $25,000 at the end of each year for 12 years. How much must you deposit today at 3% compounded annually?

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    Solution Preview

    1. FV=PV*(1+r)^n
    Here PV=$25000 r=9% n=10 years FV=25000*(1+9%)^10=$59,184.09

    2. ...

    Solution Summary

    The solution determines the annually compounded interest for different deposits in a bank. How much will be in each account after a period of time is determined.