Consider a $2,600 deposit earning 8 percent interest per year for five years. Wh
ID: 2741649 • Letter: C
Question
Consider a $2,600 deposit earning 8 percent interest per year for five years.
What is the future value? (Do not round intermediate calculations. Round your final answer to 2 decimal places.)
Future value $ _____
How much total interest is earned on the original deposit? (Do not round intermediate calculations. Round your final answer to 2 decimal places.)
Total interest earned $ _______
How much is interest earned on interest? (Do not round intermediate calculations. Round your final answer to 2 decimal places.)
Interest earned on interest $ _________
Explanation / Answer
Calculate the future value:
Future value = FV(rate,nper,pmt,(pv))
= FV(8%,5,0,(-2600))
= $3820.25
Calculate total interest earned on original deposit:
Total interest earned on original deposit = $3820.25 - $2600
= $1220.25
Calculate interest earned on interest:
Interest earned on principal = $2600 * 8%*5years = $1040
Interest earned on interest = Total interest earned - Interest earned on principal
= $1220.25 - $1040
= $180.25
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.