Bucher Credit Bank is offering 6.5 percent compounded daily on its savings accou

Question

Bucher Credit Bank is offering 6.5 percent compounded daily on its savings accounts. Assume that you deposit $6,200 today.

How much will you have in the account in 5 years? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. Use 365 days in a year.)

Future value            $

How much will you have in the account in 10 years? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. Use 365 days in a year.)

Future value            $

How much will you have in the account in 20 years? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. Use 365 days in a year.)

Future value            $

Explanation / Answer

For this problem, we simply need to find the FV of a lump sum using the equation:

FV = PV(1 + r)t

It is important to note that compounding occurs daily. To account for this, we will divide the interest rate by 365 (the number of days in a year, ignoring leap year), and multiply the number of periods by 365. Doing so, we get:

FV in 5 years = $6,200[1 + (0.065/365)]5(365) = $8,580.74

FV in 10 years = $6,200[1 + (0.065/365)]10(365) = $11,875.67

FV in 20 years = $6,200[1 + (0.065/365)]20(365) = $22,747.01

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