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The interest earned on a savings deposit is a function of four variables. - The amount of money held on deposit (PV) - The method to be used in calculating interest-for example, simple versus compound interest - The interest rate applied to the amount on deposit (1) - The frequency with which the account's interest is earned-for example, annually, semiannually, quarterly, monthly, or daily Another important variable is the amount of time during which the funds are held in the savings account ( n ). These variables and their interaction determine the account's balance at a particular point in time. How do these variables work together to determine an account's balance? Which of the following formulas would you choose to calculate the future balance on an account that earns compound interest? FV=Pn(1+i)FV=(PVi)nFV=PV(1+i)nFV=PV(1+i)t FV=PV(1+i)t Use elther the fable of future value factors, your financial colculator, or the future value formula to answer the questions that follow. Amy On Amy's first birthday, her parents deposited $2,000 into a savings account that earns a fixed rate of 6.00% and compounds interest annually. By Amy's 20th birthday, her account will have accumulated (Hint: Round your answer to the nearest cent.) What-If Scenario If Amy's parents had waited until her 10th birthday to make their initial deposit of $2,000 into the same account, by Amy's 20 th birthday, the balance would have been (Hint: Round your answer to the nearest cent.) FV=PV(1+i)t Use either the table of future value factors, your financial calculator, or the future value formula to answer the questions that follow. Amy On Amy's first birthday, her parents deposited $2,000 into a savings account that earns a fixed rate of 6.00% and compounds interest annually. By Amy's 20th birthday, her account will have accumulated (Hint: Round your answer to the nearest cent.) What-If Scenario If Amy's parents had waited until her 10 th birthday to make their initial deposit of $2,000 into the same account, by Amy's 20 th birthday, the balane would have been (Hint: Round your answer to the nearest cent.) Amy Amy's 20th birthday, her account will have accumulated (Hint: Round your answer to the nearest cent.) What-If Scenario would have been (Hint: Round your answer to the nearest cent.)

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