You just received a bonus of 4000 a What is the future value

You just received a bonus of $4000.

a. What is the future value of $4,000 in a bank account for 7 years at an annual interest rate of 5 percent? (Round to the nearest cent) $______

b. Recalculate part (a) using a compounding period that is (1) semiannual and (2) bimonthly.

c. Recalculate parts (a) and (b) using an anual interest rate of 10%.

d. Recalculate part (a) using a time horizon of 14 years at an annual interest rate of 5 percent

e. What conclusions can you draw when you compare the answers in parts (c) and (d) with the answers in parts (a) and (b)?

Round anwers to the nearest cent

Solution

Answer a) $5628.40

Answer b)

1) 5651.85

2) 5668.04

Answer c)

b-1 -) $ 7919.73

b-2 -) $ 8008.67

d) $ 7919.73

e) increaing rate of interest or duration leads to increase in future value