Answer:
a. $20,591.36
b. $1,338,456.02
c. $1,515.69
Explanation:
a.
Future Value = FV = ?
Present Value = PV = $9,918
Interest Rate = i = 11% = 0.11
Number of compounding period = n = ?
To calculate the number of compounding period 'n' we will subtract 18 from 25;
n = 25 - 18 = 7 years
Now let us substitute the given values in the following formula;
FV = PV [tex](1 + i)^{n}[/tex]
FV = 9918 [tex](1 + 0.11)^{7}[/tex]
FV = 9918 [tex](1.11)^{7}[/tex]
FV = 9918 x 2.0762
FV = 20,591.3564
FV = 20,591.36
Hence, If I leave the money in the account till my 25th birthday, I will get $20,591.36.
b.
Future Value = FV = ?
Present Value = PV = $9,918
Interest Rate = i = 11% = 0.11
Number of compounding peiod = n = ?
To calculate the number of compounding period 'n' we will subtract 18 from 65;
n = 65 - 18 = 47 years
Now let us substitute the given values in the following formula;
FV = PV [tex](1 + i)^{n}[/tex]
FV = 9918 [tex](1 + 0.11)^{47}[/tex]
FV = 9918 [tex](1.11)^{47}[/tex]
FV = 9918 x 134.9522
FV = 1,338,456.0248
FV = 1,338,456.02
Hence, If I leave the money in the account till my 65th birthday, I will get $1,338,456.02.
c.
Future Value = FV = $9,918
Present Value = PV = ?
Interest Rate = i = 11% = 0.11
Number of compounding period = n = 18
The money my grandfather put into the bank account the day I was born can be calculated as follows;
FV = PV [tex](1 + i)^{n}[/tex]
PV = [tex]\frac{FV}{(1 + i)^{n} }[/tex]
PV = [tex]\frac{9918}{(1 + 0.11)^{18} }[/tex]
PV = [tex]\frac{9918}{(1.11)^{18} }[/tex]
PV = [tex]\frac{9918}{6.5436}[/tex]
PV = 1,515.6904
PV = 1,515.69
Hence, the amount that my grand father deposited into the account on the day I was born was $1,515.69.
