Determining annual compounding


Assume that 1 year from now; you will deposit $1,000 into a savings account that

pays 8%.

a. If the Bank compounds interest annually, how much will you have in your account 4 years from now?

b. What would your balance 4 year from now be if the bank used quarterly compounding rather than annual compounding?

c. Suppose you deposited the $1,000 in 4 payments of $250 each at Years 1, 2, 3, and 4. How much would you have in your account at Year 4, based on 8% annual compounding?

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Finance Basics: Determining annual compounding
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