You deposit $2,200 in your bank account. If the bank pays 4% simple interest, ho

Question

You deposit $2,200 in your bank account. If the bank pays 4% simple interest, how much will you accumulate in your account after 10 years?

What if the bank pays compound interest (annually)? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

How much of your earnings will be interest on interest? (Round your answer to 2 decimal places.)

You deposit $2,200 in your bank account. If the bank pays 4% simple interest, how much will you accumulate in your account after 10 years?

Explanation / Answer

Hi,

Please find the answer as follows:

Part A: Future Value:

Total Interest = 2200*.04*10 = 880

Total Future Value = Prinicpal + Interest = 2200 + 880 = 3080

Part B:

Future Value (Compound) = 2200*(1+.04)^10 = 3256.537

Interest = 3256.537-2200 = 1056.54

Part C:

Interest on Interest = 1056.54 - 880 = 176.54

Thanks.

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