- Example 1
You have deposited $5,000 in your high yields savings account today. How much will you have in your account after 10 years if the effective annual interest rate is 2%?
Figure 1: Cash Flow Diagram
- Example 2
The nominal interest rate is 4% compounded quarterly. What is the effective annual interest rate?
- Example 3
You have deposited a certain amount in your savings account today (i=1.5%). After 15 years, you have $10,500 in your account;
Figure 2: Cash Flow Diagram
(a)how much was your initial deposit(P0)?
(b)how much is the interest paid?