On January 1, 2016, you deposited $6,400 in a savings acc each year. ccunt vill

Question

On January 1, 2016, you deposited $6,400 in a savings acc each year. ccunt vill eam 12 percent annual compound interest, which il be added to the fund balance at the end of Required: 1. What will be the balance in the savings account at the end of 3 years? (Future Value of S1, Present Value of $1, Future Value Annuity of S1, Present Value Annuity of $1.) (Use appropriate factor(s) from the tables provided. Round your final answers to 2 decimal places.) lance in the Savings Account 2. What is the total interest for the 3 years? (Future Value of $1, Present Value of S1, Future Value Annuity of $1, Present Value Annuity of $1.) (Use appropriate factor(s) from the tables provided. Round your final answers to 2 decimal places.) 3. How much interest revenue did the fund earn in 2016 and in 2017? (Round your final answers to 2 decimal places.) 2016 Interest Revenue 2017 Interest Revenue

Explanation / Answer

1)

Balance at the end of 3 years

= Principal x ( 1 + r ) ^ n

Where,

Principal = $6,400

r = Rate of interest = 12% or 0.12

n = Years = 3

So, Future value

= $6,400 x 1.12 ^ 3

= $6,400 x 1.404928

= $8,991.54

2)

Total interest

Future value - Present value

= $8,991.54 - $6,400

= $2,591.54

3)

Interest for 2016

= Future value at end of 2016 - Value at beginning of 2016

= $6,400 x 1.12 - $6,400

= $7,168 - $6,400

= $768

Interest for 2017

= Value at end of 2017 - Valie at beginning of 2017

= $6,400 x 1.12 ^ 2 - $7,168

= $8,028.16 - $7,168

= $860.16

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