Assume you are able to put $8,000 in a savings account today that pays 6% interest rate. Assume, you make no withdrawals in the period of your investment. 1) How much will you have in 5 years from now if the interest rate is simple? 2) How much will you have in 5 years from now if the interest rate is compounded annually? 3) How much will you have in 5 years from now if interest rate is 6% (annually) compounded semi-annually?
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Q)Assume you are able to put $8,000 in a savings account today that pays 6% interest rate. Assume, you make no withdrawals in the period of your investment. 1) How much will you have in 5 years from now if the interest rate is simple? 2) How much will you have in 5 years from now if the interest rate is compounded annually? 3) How much will you have in 5 years from now if interest rate is 6% (annually) compounded semi-annually? 4) How much will you have in 5 years from now if interest rate is 6% (annually) compounded monthly? 5) Compare your answer. Make your decision which option is better economically. 6) Describe the main differences between compound and simple interest?
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