PFIN 2nd Edition by Lawrence Gitman ,Michael Joehnk,Randall Billingsley

Exercise 1

If you put $4,000 in a savings account that pays interest at the rate of 4%, compounded annually, how much will you have in 5 years? ( Hint: Use the future value formula.) How much interest will you earn during the 5 years? If you put $4,000 each year into a savings account that pays interest at the rate of 4% a year, how much would you have after 5 years?