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Spartan Credit Bank is offering 8.1 percent compounded daily on its savings accounts. You deposit $6,500 today. a. How much will you have in the account in 5 years

Sagot :

Shahzaibfaraz

Answer:

FV = $9745.02838  rounded off to $9745.03

Explanation:

To calculate the amount of money in account after five years, we will use the formula for future value of cash flow. The formula is as follows,

FV = Present value * (1+i)^t

Where,

  • i is the annual interest rate
  • t is the time in years

As we have annual interest rate of 8.1% but it is compounded daily, we will use 8.1%/365 in our formula to get daily rates. Move over as the compounding is done daily, we will take 365*5 days instead of 5 years.

So,

FV = 6500 * [1+(8.1%/365)]^(5*365)

FV = $9745.02838  rounded off to $9745.03

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