What would be the interest earned on a $6,000 deposit during the second year of its life if no money is withdrawn from the bank during that time, and the deposit pays an annual interest rate of 2.5 percent, with annual compounding?

The interest earned during the second year of the life of a deposit of $6,000 if no money is withdrawn from the bank during that time is $153.75.

Explanation:

Since it is an annual compounding without any money withdrawn, that mean interest will be paid on both the principal and the first year interest income. Therefore, we have:

First year interest earned = Principal * Annual interest rate = $6,000 * 2.5% = $150

Second year interest earned = (Principal + First year interest earned) * Annual interest rate = ($6,000 + $150) * 2.5% = $6,150 * 2.5% = $153.75

Therefore, the interest earned during the second year of the life of a deposit of $6,000 if no money is withdrawn from the bank during that time is $153.75.

d. low interest rates

a manufacturer of printed circuit boards uses exponential smoothing with trend to forecast monthly demand of its product. at the end of december, the company wishes to forecast sales for january. the estimate of trend through november has been 200 additional boards sold per month. average sales have been around 1000 units per month. the demand for december was 1100 units. the company uses α = 0.20 and β = 0.10. make a forecast including trend for the month of january.