Bucher Credit Bank is offering 5.9 percent compounded daily on its savings accounts. Assume that you deposit $5,600 today.

Bucher Credit Bank is offering 5.9 percent compounded daily on its savings accounts. Assume that you deposit $5,600 today.

Requirement 1:

How much will you have in the account in 4 years? (Do not include the dollar sign ($). Enter rounded answer as directed, but do not use the rounded numbers in intermediate calculations. Use 365 days in a year. Round your answer to 2 decimal places (e.g., 32.16).)

Future value

$

Requirement 2:

How much will you have in the account in 8 years? (Do not include the dollar sign ($). Enter rounded answer as directed, but do not use the rounded numbers in intermediate calculations. Use 365 days in a year. Round your answer to 2 decimal places (e.g., 32.16).)

Future value

$

Requirement 3:

How much will you have in the account in 16 years? (Do not include the dollar sign ($). Enter rounded answer as directed, but do not use the rounded numbers in intermediate calculations. Use 365 days in a year. Round your answer to 2 decimal places (e.g., 32.16).)

Future value

$

rev: 04-30-2011

Explanation:

For this problem, we simply need to find the FV of a lump sum using the equation:

FV = PV(1 + r)t

It is important to note that compounding occurs daily. To account for this, we will divide the interest rate by 365 (the number of days in a year, ignoring leap year), and multiply the number of periods by 365. Doing so, we get:

FV in 4 years	= $5,600[1 + (0.059/365)]4(365)	= $7,090.44
FV in 8 years	= $5,600[1 + (0.059/365)]8(365)	= $8,977.56
FV in 16 years	= $5,600[1 + (0.059/365)]16(365)	= $14,392.26

Calculator Solution:

Note: Intermediate answers are shown below as rounded, but the full answer was used to complete the calculation.

Enter

4 × 365

5.9% / 365

±$5,600

N

I/Y

PV

PMT

FV

Solve for

$7,090.44

Enter

8 × 365

5.9% / 365

±$5,600

N

I/Y

PV

PMT

FV

Solve for

$8,977.56

Enter

16 × 365

5.9% / 365

±$5,600

N

I/Y

PV

PMT

FV

Solve for

$14,392.26