4. Ch04 Financial Planning Exercise 7 eBook Chapter 4 Financial Planning Exercise 7 Calculating interest earned and future value of savings account If you put $2,000 in a savings account that pays interest at the rate of 4 percent, compounded annually, a. how much will you have in seven years? Round the answer to the nearest cent. Round FV-factor to three decimal places or use the Appendix A. (Hint: Use the future value formula.) $ b. how much interest will you earn during the seven years? Round the answer to the nearest cent. $ c. If you put $2,000 at the end of each year into a savings account that pays interest at the rate of 4 percent a year, how much would you have after seven years? Use the Appendix B. Round the answer to the nearest cent. Round FV-factor to three decimal places. $ Grade it Now Save & Continue Continue without saving 4-5 Establishing a Savings Program LO5, L06 The vast majority of American families have some form of savings, making it clear that most of us understand the value of saving for the future. In the years since the financial crisis of 2007-2008, the U.S. personal saving rate increased to an average of about 5 percent of after-tax income after hitting a low of around 1 percent in 2005. Saving is intended to preserve the value of money, ensure liquidity, and earn a competitive rate of return. Almost by definition, smart savers are smart investors. They regard saving as more than putting loose change into a piggy bank; rather, they recognize the importance of saving and know that savings must be managed as astutely as any security. After all, what we normally think of as "savings" is really a form of investing -albeit in short-term, highly liquid, low-risk investments. Establishing and maintaining an ongoing savings program is a vital element of personal financial planning. To get the most from your savings, however, you must understand your options and how different savings vehicles pay interest. Almost by definition, smart savers are smart investors