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Quarterly compounding rather than annual compounding

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Assume that 1 year from now you plan to deposit $1000 in a savings account that pays a nominal rate of 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 be 4 years from now if the bank used quarterly compounding rather than annual compounding?

c. Suppose you deposited the $1000 in 4 payments of $250 each at the year 1, 2, 3, and 4. How much would you have in your account at the end of Year 4, based on 8% annual compounding?

d. Suppose you deposited 4 equal payments in your account at the end of Years 1, 2, 3, and 4. Assuming an 8% interest rate, how large would each of your payments have to be for you to obtain the same ending balance as you calculated in part a?

Reference no: EM133234309

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