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Calculating future value of a deposit

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You have just placed $1,500 in a bank savings deposit and plan to hold that deposit for eight years, earning 5.5 percent per year. If the bank compounds interest daily, what will be the total value of the deposit in eight years? How does your answer change if the bank switches to monthly compounding? Quarterly compounding?

PLEASE USE AN EXCEL SPREADSHEET FOR RESPONSE.

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Solution Summary

Solution describes the steps to calculate the future value of a deposit in the given cases with the help of suitable functions in MS Excel.

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Please refer attached file for better understanding of functions in MS Excel.

Solution:

Case 1 - Daily Compounding
Rate of interest=5.5% annual
Rate=Rate of interest per day=5.5%/365=0.01507%
nper=number of periods=8*365=2920 days
PV=present vaule of deposit=$1,500
Type = End of period =0 0 for end of period ...

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  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
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