Question

Justin invests $3,000 in a savings account. The account pays 3% interest compounded annually. How much money will be in the account at the end of the 8 years

Answer 1

Present value= $3,000

Yield to maturity= 3%

Time= 8 years

The future value of $3,000 is calculated using the below formula:

FV=PV (1+r)^t

FV= $3,000*(1+ 0.03)^8

     = $3,000*1.2668 = $3,800.31.

It can also be solved using a financial calculator by entering the below in a financial calculator:

PV= -3,000; I/Y= 3; N= 8

Press CPT and FV to calculate the value at the end of 8 years.

Therefore, $3,800.31 will be in the account at the end of 8 years.