1.   Suppose that you deposit $500 in a bank that offers an annual percentage rate of 6.0% compounded annually. 

        a.  What is your account balance after one year?
        b.  What is your account balance after 10 years?  Do this problem two ways, in Excel using a table and using the compounding formula  P(1+r)^n.

2. How long will it take your money to triple at an annual percentage rate of 8% compounded annually?

3.  Suppose that you deposit $500 in a bank that offers an annual percentage rate of 6.0% compounded monthly.

        a.  What is your account balance after one year?  
        b.  What is your account balance after 10 years? 
        c.  What is the annual percentage yield for this account? (Recall that the annual percentage yield is the percentage change in the account for one year, in this case in 12 months.)

4.  Compare the accumulated balance in three accounts that all start with an initial deposit of $1000. All three accounts have an annual percentage rate of 5.5%, but the first account compounds interest annually, the second account compounds interest quarterly while the third account compounds interest monthly. Make  tables that shows the accumulated balance in all three accounts for one year.  You'll have three tables, each of different length:

        a.  Paste your tables into your Word document.
        b.  Write a short paragraph discussing the differences between the accounts indicating which account is the largest and which is the smallest.
        c.  Calculate the annual percentage yield for each account. Do you want an account that compounds interest annually, quarterly or monthly (given that the annual interest rate is the same)? 

5. Suppose you start saving today for a $5,000 house payment that you plan to make in 5 years. Assume you make no deposits into the account after your initial deposit. In order to reach your $5,000 goal, how much will you need to deposit in each account described?

a. An account with annual compounding and an annual percentage rate of 9%.  

b. An account with quarterly compounding and an annual percentage rate of 9%. 

6. Suppose you had a choice between two investments. One compounds interest annually at an annual percentage rate of 4.50%.  The other compounds interest monthly at an annual percentage rate 4.45%.  Which is the higher yielding investment?  Briefly explain why.