Question

Kern Company deposited $1,000 in the bank on January 1, 2017, earning 8% interest. Kern Company withdraws the deposit plus accumulated interest on January 1, 2019. Compute the amount of money Kern withdraws from the bank assuming that interest is compounded (a) annually, (b) semiannually, and (c) quarterly.

Answer 1

Answer:

Instructions are listed below.

Explanation:

Giving the following information:

Kern Company deposited $1,000 in the bank on January 1, 2017, earning 8% interest. Kern Company withdraws the deposit plus accumulated interest on January 1, 2019.

We need to use the following formula:

FV= PV*(1+i)^n

A) i= 0.08 n=2

FV= 1000*(1.08^2)= $1,166.4

B) i= 0.08/2= 0.04    n= 4

FV= 1,000*(1.04^4)= $1,169.86

C) i= 0.02    n= 8

FV= 1,000*(1.02^8)= $1,171.66