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You deposit $1,200 in your bank account. a. If the bank pays 5% simple interest, how much will you accumulate in your account after 8 years? Future value b. How much will you accumulate if the bank pays compound interest? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Future value

You deposit $1,200 in your bank account. a. If the bank pays 5% simple interest, how much will you accumulate in your account after 8 years? Future value b. How much will you accumulate if the bank pays compound interest? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Future value

Essentials Of Investments
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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S You deposit $1,200 in your bank account. a. If the bank pays 5% simple interest, how much will you accumulate in your account after 8 years? Future value Saved b. How much will you accumulate if the bank pays compound interest? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Future value M Question 7
Transcribed Image Text:S You deposit $1,200 in your bank account. a. If the bank pays 5% simple interest, how much will you accumulate in your account after 8 years? Future value Saved b. How much will you accumulate if the bank pays compound interest? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Future value M Question 7
Expert Solution
Step 1: Calculate future value

a. 

Amount deposited = $1,200

Interest rate, r = 5%

Period, t = 8 years


If the bank pays simple interest, the amount accumulated after 8 years will be 

table row cell F u t u r e space v a l u e end cell equals cell A m o u n t space d e p o s i t e d cross times left parenthesis 1 plus r t right parenthesis end cell row blank equals cell $ 1 comma 200 cross times open parentheses 1 plus 0.05 cross times 8 close parentheses end cell row blank equals cell $ 1 comma 200 cross times 1.4 end cell row blank equals cell $ 1 comma 680 end cell end table

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