1. It is now January 1, 2018. You will deposit $1,000 today into a savings account that pays 8 percent. a. If the bank compounds interest annually, how much will you have in your account on January 1, 2021? b. What would your January 1, 2021, balance be if the bank used quarterly compounding? c. Suppose you deposit $1,000 in 3 payments of $333.333 each on January 1 of 2019, 2020, and 2021.
1. It is now January 1, 2018. You will deposit $1,000 today into a savings account that pays 8 percent.
a. If the bank compounds interest annually, how much will you have in your account on January 1, 2021?
b. What would your January 1, 2021, balance be if the bank used quarterly compounding?
c. Suppose you deposit $1,000 in 3 payments of $333.333 each on January 1 of 2019, 2020, and 2021.
How much would you have in your account on January 1, 2021, based on 8 percent annual compounding?
d. How much would be in your account if the 3 payments began on January 1, 2018?
e. Suppose you deposit 3 equal payments in your account on January 1 of 2019, 2020, and 2021.
Assuming an 8 percent interest rate, how large must your payments be to have the same ending balance as
in part a?
2. A $25,000 loan is to be repaid in equal installments at the end of each of the next 3 years. The interest
rate is 10 percent, compounded annually. Calculate the loan repayment being made each year.
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