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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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BuyFindarrow_forward

Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Future Values

On January 1, Beth Woods made a single deposit of $8,000 in an investment account that earns 8% interest.

Required:

Note: Round answers to two decimal places.

1. Calculate the balance in the account in 5 years assuming the interest is compounded annually.

2. Determine how much interest will be earned on the account in 7 years if interest is compounded annually.

3. Calculate the balance in the account in 5 years assuming the 8% interest is compounded quarterly.

To determine

Concept introduction:

Time value of money:

Time value of money is the concept that differentiates the value of money received today and the value of same money received in future. According to this concept, the same amount of money to be received in future shall have lower present value (value of the money today) due to the interest that could be earned on that money.

Requirement 1:

To calculate:

Balance in the account in 5 Years.

Explanation

For the calculation of the balance in the account after 5 years we get to get all the data related to it and put that into the formula and after that we get the balance in account.

Present Value 80...
To determine

Concept introduction:

Time value of money:

Time value of money is the concept that differentiates the value of money received today and the value of same money received in future. According to this concept, the same amount of money to be received in future shall have lower present value (value of the money today) due to the interest that could be earned on that money.

Requirement 2:

To calculate:

How much interest we earned in 7 years?

To determine

Concept introduction:

Time value of money:

Time value of money is the concept that differentiates the value of money received today and the value of same money received in future. According to this concept, the same amount of money to be received in future shall have lower present value (value of the money today) due to the interest that could be earned on that money.

Requirement 3:

To calculate:

Calculate interest.

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