How much is there in a savings account in 2 year we deposit $5,000 now at a rate of 0.25% per month compounded yearly?

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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How much is there in a savings account in 2 years if we
deposit $5,000 now at a rate of 0.25% per month
compounded yearly?
$5369
2
$9146
$10168
4.
$5304
3.
Transcribed Image Text:How much is there in a savings account in 2 years if we deposit $5,000 now at a rate of 0.25% per month compounded yearly? $5369 2 $9146 $10168 4. $5304 3.
Expert Solution
Step 1

We need to compute the future value of $5,000 after 2years, Formula for same is :

= A ( 1 + r)n

Rate = 0.25% per month

Annual rate, r  = 0.25% x 12 = 3% p.a

Compounding period = Annually

No. of years, n = 2

Amount, A = $5,000

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