Suppose you invest $1,200 in an account paying 5% interest per year. a. What is the balance in the account after 4 years? How much of this balance corresponds to "interest on interest"? b. What is the balance in the account after 29 years? How much of this balance corresponds to "interest on interest"?

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
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5. 

Suppose you invest $1,200 in an account paying 5% interest per year.
a. What is the balance in the account after 4 years? How much of this balance corresponds to "interest on interest"?
b. What is the balance in the account after 29 years? How much of this balance corresponds to "interest on interest"?
a. What is the balance in the account after 4 years?
The balance in the account after 4 years is $
How much of this balance corresponds to "interest on interest"?
The amount that corresponds to interest on interest is $. (Round to the nearest cent.)
b. What is the balance in the account after 29 years?
The balance in the account after 29 years is $
How much of this balance corresponds to "interest on interest"?
The amount that corresponds to interest on interest is $
(Round to the nearest cent.)
(Round to the nearest cent.)
(Round to the nearest cent.)
Transcribed Image Text:Suppose you invest $1,200 in an account paying 5% interest per year. a. What is the balance in the account after 4 years? How much of this balance corresponds to "interest on interest"? b. What is the balance in the account after 29 years? How much of this balance corresponds to "interest on interest"? a. What is the balance in the account after 4 years? The balance in the account after 4 years is $ How much of this balance corresponds to "interest on interest"? The amount that corresponds to interest on interest is $. (Round to the nearest cent.) b. What is the balance in the account after 29 years? The balance in the account after 29 years is $ How much of this balance corresponds to "interest on interest"? The amount that corresponds to interest on interest is $ (Round to the nearest cent.) (Round to the nearest cent.) (Round to the nearest cent.)
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