connect. FNCE 3050-Basic FINANCE Problems Question 7 (of 20) value 10.00 points
ID: 2779848 • Letter: C
Question
connect. FNCE 3050-Basic FINANCE Problems Question 7 (of 20) value 10.00 points Consider a $5,500 deposit earning 8 percent interest per year for 8 years What is the future value? (Do not round intermediate calculations. Round your final answer to 2 decimal places.) Future value How much total interest is earned on the original deposit? (Do not round intermediate calculations. Round your final answer to 2 decimal places.) Total interest earned How much is interest earned on interest? (Do not round intermediate calculations. Round your final answer to 2 decimal places.) Interest earned on the interest Hints References eBook & Resources Hint#1 ch 4 ProbleExplanation / Answer
We use the formula:
A=P(1+r/100)^n
where
A=future value
P=present value
r=rate of interest
n=time period.
A = $ 5,500 *(1+8/100) ^ 8
= $ 5,500* 1.85093021
= $ 10,180.12
Total Interest on Original Deposit = Principal * Interest rate * Times
= $ 5,500 *8%*8
= $ 3,520.00
Interest Earned on Interest = ( Future Value - Principal Amount) - Total Interest on Original Deposit
= ( $10,180.12 - $ 5,500 ) - $ 3,520.00
= $ 1,160.12
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.