Assume that 1 year from now you plan to deposit €1,000 in a savings account that pays a rate of 8 percent. a. If the bank compounds interest annually how much will you have in your account 4 years from now? b. Suppose you deposited the €1,000 in 4 payments of €250 each at the end of Years 1, 2, 3 and 4. How much would you have in your account at the end of Year 4, based on 8 percent annual compounding? c. Suppose you deposited four equal payments in your account at the end of Years 1, 2, 3 and 4. Assuming an 8 percent interest rate, how large would each of your payments have to be for you to obtain the same ending balance as you calculated in part a?
Assume that 1 year from now you plan to deposit €1,000 in a savings account that pays a rate of 8 percent. a. If the bank compounds interest annually how much will you have in your account 4 years from now? b. Suppose you deposited the €1,000 in 4 payments of €250 each at the end of Years 1, 2, 3 and 4. How much would you have in your account at the end of Year 4, based on 8 percent annual compounding? c. Suppose you deposited four equal payments in your account at the end of Years 1, 2, 3 and 4. Assuming an 8 percent interest rate, how large would each of your payments have to be for you to obtain the same ending balance as you calculated in part a?
Chapter5: The Time Value Of Money
Section: Chapter Questions
Problem 24P
Related questions
Question
Assume that 1 year from now you plan to deposit €1,000 in a savings account that pays a rate of 8 percent.
a. If the bank
b. Suppose you deposited the €1,000 in 4 payments of €250 each at the end of Years 1, 2, 3 and 4. How much would you have in your account at the end of Year 4, based on 8 percent annual compounding?
c. Suppose you deposited four equal payments in your account at the end of Years 1, 2, 3 and 4. Assuming an 8 percent interest rate, how large would each of your payments have to be for you to obtain the same ending balance as you calculated in part a?
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 4 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
Principles of Accounting Volume 2
Accounting
ISBN:
9781947172609
Author:
OpenStax
Publisher:
OpenStax College
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
Principles of Accounting Volume 2
Accounting
ISBN:
9781947172609
Author:
OpenStax
Publisher:
OpenStax College
Pfin (with Mindtap, 1 Term Printed Access Card) (…
Finance
ISBN:
9780357033609
Author:
Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Publisher:
Cengage Learning