Consider a $2,000 deposit earning 8 percent interest per year for five years. What is the future value, and how much total interest is earned on the original deposit vs. how much is interest earned on interest?
Answer to relevant QuestionsConsider a $5,000 deposit earning 10 percent interest per year for 10 years. What is the future value, how much total interest is earned on the original deposit, and how much is interest earned on interest?What is the value in year 10 of a $1,000 cash flow made in year 3 if interest rates are 9 percent?At age 25 you invest $1,500 that earns 8 percent each year. At age 40 you invest $1,500 that earns 11 percent per year. In which case would you have more money at age 65? Oil prices have increased a great deal in the last decade. The table below shows the average oil price for each year since 1949. Many companies use oil products as a resource in their own business operations (like airline ...Use the idea of compound interest to explain why EAR is larger than APR.
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