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17 March, 14:45

Calculating Future Values. You have $6,150 to deposit. Regency Bank offers 12 percent per year compounded monthly (1 percent per month), while King Bank offers 12 percent but will only compound annually. How much will your investment be worth in 20 years at each bank?

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  1. 17 March, 16:42
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    Instructions are listed below.

    Explanation:

    Giving the following information:

    You have $6,150 to deposit.

    Regency Bank:

    offers 12 percent per year compounded monthly

    King Bank:

    offers 12 percent but will only compound annually.

    We need to use the following formula:

    FV = PV * (1+i) ^n

    The only variation between banks is i and n.

    Regency:

    n = 12*20 = 240

    i = 0.01

    FV = 6,150 * (1.01^240) = $66,989.21

    King:

    n = 20

    i = 0.12

    FV = 6,150 * (1.12^20) = $59,324.70
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