Question

You deposit $10,000 in a savings account where the interest rate is 3% compounded annually. At...

You deposit $10,000 in a savings account where the interest rate is 3% compounded annually. At the beginning

of the 6th year, the bank raises its interest rate to 3.5%. How much will you have accumulated after 15 years?

Homework Answers

Answer #1
Step 1 : Future value at the end of year 5
FV= PV*(1+r)^n
Where,
FV= Future Value
PV = Present Value
r = Interest rate
n= periods in number
= $10000*( 1+0.03)^5
=10000*1.15927
= $11592.74
Step 2 : Value at theend of year 15
FV= PV*(1+r)^n
Where,
FV= Future Value
PV = Present Value
r = Interest rate
n= periods in number
= $11592.74*( 1+0.035)^10
=11592.74*1.4106
= $16352.7
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