Answered: A bank features a savings account that…

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter4: Time Value Of Money

Section: Chapter Questions

Problem 3STP

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Question

A bank features a savings account that has an annual percentage rate of r=3.1r=3.1% with interest compounded quarterly. Breanna deposits $6,500 into the account.

The account balance can be modeled by the exponential formula S(t)=P(1+rn)ntS(t)=P(1+rn)nt, where SS is the future value, PP is the present value, rr is the annual percentage rate written as a decimal, nn is the number of times each year that the interest is compounded, and tt is the time in years.

(A) What values should be used for PP, r, and nn?

P=P= , r=r= , n=n=

(B) How much money will Breanna have in the account in 88 years?
Answer = $ .
Round answer to the nearest penny.

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