a. A friend of yours, Grace, wants to purchase a house in five years. To save for
Question:
a. A friend of yours, Grace, wants to purchase a house in five years. To save for the house, Grace decides to deposit $112,000 in a savings account on January 1 of this year. The savings account will earn 6% annually. Any interest earned will be added to the fund at year-end (rather than withdrawn).
b. At the end of each year, a different friend, Claire, plans to deposit $9,000 in a savings account. The account will earn 9% annual interest, which will be added to the fund balance at year-end. Claire will make her first deposit at the end of this year.
Required (show computations and round to the nearest dollar):
1. In (a), how much will be available at the end of five years? What is the total interest earned over the four years?
2. In (b), what will be the balance in the savings account at the end of the 8th year (i.e., after 8 deposits)? What is the interest earned on the 8 deposits?
Step by Step Answer:
Financial Accounting
ISBN: 978-1259222139
9th edition
Authors: Robert Libby, Patricia Libby, Frank Hodge