Question

(Compound value ) Stanford Simmons, who recently sold his Porsche, placed $9,400 in a savings account paying annual compound interest of 6 percent.

a. Calculate the amount of money that will have accrued if he leaves the money in the bank for 3 , 6 , and 16 years.

b. If he moves his money into an account that pays 8 percent or one that pays 10 percent, rework part (a) using these new interest rates.

Answer a. The accrued value in 3 years is $ , in 6 years $ , and in 16 years $ . (Round to the nearest cent and use thousands separators.)

Answer b. At 8 percent, the accrued value in 3 years is $ , in 6 years $ , and in 16 years $ . (Round to the nearest cent and use thousands separators.)

At 10 percent, the accrued value in 3 years is $ , in 6 years $ , and in 16 years $ . (Round to the nearest cent and use thousands separators.)

Answer 1

FV = PV * (1 + r)^n

PV = 9,400

a. At 6%

r = 6%, n = 3	FV = 9,400 * (1 + 0.06)^3 = $11,195.55
r = 6%, n = 6	FV = 9,400 * (1 + 0.06)^6 = $13,334.08
r = 6%, n = 16	FV = 9,400 * (1 + 0.06)^19 = $28,440.64

b. At 8%

r = 8%, n = 3	FV = 9,400 * (1 + 0.08)^3 = $11,841.29
r = 8%, n = 6	FV = 9,400 * (1 + 0.08)^6 = $14,916.62
r = 8%, n = 16	FV = 9,400 * (1 + 0.08)^19 = $40,567.59

At 10%

r = 10%, n = 3	FV = 9,400 * (1 + 0.10)^3 = $12,511.40
r = 10%, n = 6	FV = 9,400 * (1 + 0.10)^6 = $16,652.67
r = 10%, n = 16	FV = 9,400 * (1 + 0.10)^19 = $57,489.55

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