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Assume the interest rate on a savings account pays 7 percent annual interest.

1-If the interest is compounded annually, what is the future value of $1,000 invested in this account for 6 years?

2-If the interest is compounded monthly, what is the future value of $1,000 invested in this account for 6 years?

3-If the interest is compounded daily, what is the future value of $1,000 invested in this account for 6 years?

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Nestor Rutherford
Nestor RutherfordLv2
28 Sep 2019
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Related questions

Future Value. You are hoping to buy a house in the future and recently recieved an inheritance of $22,000. You intend to use your inheritance as a down payment on your house.

a. If you put your inheritance in an account that earns 9 percent interest compounded annually, how many years will it be before your inheritance grows to $34,000?

b. If you let your money grow for 10.5 years at 9%, how much will you have?

c. How long will it take to grow to $34,000 if you move into an account that pays 3% compounded annually?

d. How long will it take to grow to $34,000 if you move into an account that pays 13% compounded annually?

Compounding frequency and time value: You plan to invest $2,000 in an individual retirement arrangement (IRA) today at a nominal annual rate of 8%, which is expected to apply to all future years.

a. How much will you have in the account at the end of 10 years if interest is compounded (1) annually, (2) semiannually, (3) daily (assume 365-day year), and (4) continuously?

b. What is the effective annual rate (EAR) for each compoundings period in part a?

c. How much greater will your IRA balance be at the end of 10 years if interest is compounded continuously rather than annually?

d. How does the compounding frequency affect the future value and effective annual rate for a given deposit? Explain in terms of your findings in part a throughc.

1. Holy Regis invested 10,000 in a saving account that paid an annual interest rate of 6% compounded monthly. In three years, holly will have
A. 11,967
B. 10,623
C. 11,415
D. 11,067
E. None of the above


2. The concept that an item is not large enough to influence the users of a financial statement is
A. Cost effectiveness
B. Materiality
C. Reliability
D. Relevance
E. None of the above


3. Credit sales increase
A. cash
B. Accounts recieveable
C. Owners equity
D. Both b and c
E. None of the above

4. Karen is saving for a car. The car cost 22,000. How much must Karen invest in a savings account that pays 4% annually to have the $22,000 in three years. Round to the nearest dollar
A. $20,147
B. $19,107
C. $19,558
D. $19,328
E. None of the above


5. The quality that ensure that information is reasonable free from error is
A. Reliability
B. Relevant
C. Understandability
D. Consistent
E. None of the above


6. Which of the following is not an expense?
A. Utilities
B. Insurance
C. Dividends
D. Cost of goods sold
E. None of the above

7. Ginger invested $10,000 in a bank account offshore bank. The account pays 3% interest compounded annually. How much will Ginger have in 5 years? Round to the nearest dollar
A. $11,593
B. $11,108
C. $10,123
D. $12,619
E. None of the above

8. Holly invested $6,000 in a savings account that paid an annual interest rate f 6%!l compounded annually. In three years, holly will have
A. $11,967
B. $10,623
C. $11,415
D. $11,067
E. None of the above

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