All parts of this problem concern a savings account that is opened with an initial deposit of $1000, and which earns monthly interest with an APR of 8.5% for four years. 1. Calculate the final balance using the monthly version of the Compound Interest Balance Formula (to the nearest cent) as directed below. a. Break the computation of the balance into two parts, first round 1 + APR/12 to the nearest hundredth, and then use this rounded value in the Compound Interest Balance Formula. b. Break the computation of the balance into two parts, first round 1 + APR/12 to the nearest thousandth, and then use this rounded value in the Compound Interest Balance Formula. c. Break the computation of the balance into two parts, first round 1 + APR/12 to the nearest ten-thousandth, and then use this rounded value in the Compound Interest Balance Formula.

2. a. Get full accuracy out of your scientific calculator when finding the final balance (to the nearest cent) by not doing any rounding of intermediate calculations yourself. Here is the sequence of calculator key-strokes that should work with many/most scientific calculators: 1000( 1 + .085 12 ) ^ 48 = Again, report your answer to the nearest cent. Be sure to explain where the 48 in this calculation comes from. b. Compare your answer to part 2.a. with your answers to part 1. What conclusion can you make here about the effect of rounding 1 + APR/12 that might help you with doing homework (and exam) problems?

3. a. Calculate the APY for this situation and round your answer to the nearest hundredth of a percent. Be sure to explain which part(s) of the data (principal of $1000, interest compounded monthly, APR of 8.5%, term of four years) you used and which part(s) you were able to ignore. b. Use the rounded APY from part 3a in the APY Balance Formula to calculate the balance after four years (to the nearest cent). c. Compare the balances that you calculated in parts 2.a. and 3.b., and answer both of the following questions: i. If the balance in 3.b. is not exactly the same as the balance in 2.a., why do you think that this happens? ii. In general, in a situation where you are not told the APR, but you are given the APY to the nearest hundredth of a percent, which of the following statements best describes how useful the APY Balance Formula is. We can use the APY Balance Formula to calculate the real balance exactly because its a valid formula from the book and the videos. The APY Formula will give us a slightly different answer from the real balance because we dont have the exact APY. The APY Formula will give us a slightly different answer from the real balance because it assumes that the balance is compounded only once per year. The APY Formula will give us a very different answer from the real balance because it assumes that the balance is compounded only once per year. The APY Formula will give us a very different answer from the real balance because its a completely different formula than the Compound Interest Balance Formula, which would be the best formula to use?