effects of compounding
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The Wintergreens are planning ahead for their son's education. He is eight years old now and will start college in 10 years. The couple can deposit $35,000 today with one of the three local banks. Bank A pays 8.25% with annual compounding; Bank B pays 8.125% with quarterly compounding; and Bank C pays 8% with monthly compounding.
(1) How much will they have in 10 years if they choose Bank A?
(2) How much will they have in 10 years if they choose Bank B?
(3) How much will they have in 10 years if they choose Bank C?
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The expert examines the effects of compounding for the son's education.
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the formula for compound interest is FV = PV(1+r)^n, where r is the per period interest rate and n is the ...
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