Beatty Solutions is determining the ending cash and cash equivalents for the December 31, 2020 balance sheet. The following information is provided:


Screenshot 2024 01 09 163718

Beatty Solutions is determining the ending cash and cash equivalents for the December 31, 2020 balance sheet. The following information is provided:

Screenshot 2024 01 09 163718

Beverly Hills started a paper route on January 1, 2009. Every three months, she deposits $550 in her bank account, which earns 8 percent annually but is compounded quarterly. On December 31, 2012, she used the entire balance in her bank account to invest in an investment at 7 percent annually.

 

How much will she have on December 31, 2015? Use Appendix A and Appendix C for an approximate answer, but calculate your final answer using the formula and financial calculator methods. (Do not round intermediate calculations. Round your final answer to 2 decimal places

 

Step 1 of 2

According to problem, Beverly Hills started a paper route on January 1,2009. Every three months, she deposits $550 in her bank account, which earns 8% annually but is compounded quarterly. On December 31, 2012, she used the entire balance in her bank account to invest in an investment at 7% annually. Now calculate the future value of “Beverly Hills bank account on December 31, 2015.

Future value can be determined with the help of following formula-FV=P(1+rn)nt

Here:

 

FV is the future value .

P is the principal amount

r is the annual interest rate

n is the number of times interest is compounded per year.

t is the time the money is invested for in years.

Explanation:

Future value of Beverly Hills investment on December 31, 2015 will be calculated with the use of compound interest formula.in the formula P is principal amount that is initial deposit, r is annual interest rate, n is number of time interest is compounded per year and t is the time the money is invested for in year.

 

Step 2 of 2

In order to find the future value, the following compound interest formula will be used:

FV=P(1+rn)nt

Future value on 31 December 2012 –

 

Principal (P):$550

Annual interest rate (r): 8%or0.08

Compounded quarterly (n):4 times a year

Time (t): From January 1, 2009, to December 31, 2015, is 4 years

FV=550(1+0.084)4*4

FV= 550(1+0.02)16

FV=755.03

Now calculate the future value of this amount when invested at 7% annually from January 1, 2013 to December 31, 2015.

FV=Presentvalue( 1+ interest rate)t

FV = 755.03(1+0.07)3

FV = 924.94

Explanation:

Future value on 31 December 2015 is computed by using the compound interest formula till 31 December 2012 and after that simple interest formula is used on the amount on 31 December 2012 (755.03) because the compounded amount on 31 December is used to invest at7% return.

 

Final solution

She will have 924.94 on December 31, 2015.

Therefore the computed Future value is $924.94

 

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