Question

In: Economics

Consider the following scenario: You plan to make quarterly deposits into a savings account that earns...

Consider the following scenario: You plan to make quarterly deposits into a savings account that earns 10% interest compounded continuously. You plan to make the first deposit of $500 at the end of the first quarter and increase the deposit by $100 each subsequent quarter. Which of the following best represents the future value of this scenario at the end of the 7th year?

Solutions

Expert Solution

Solution :-

Effective Quarterly Interest Rate = [ e 0.025 - 1 ] = 1.02532 - 1 = 0.02532 = 2.532%

Now

Total Quarterly Deposits = 7 * 4 = 28

Therefore the future value of this scenario at the end of the 7th year = $67,604.27

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Rahul Sunny answered 8 months ago
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