Question

In: Finance

Victor French made deposits of $4,600 at the end of each quarter to Book Bank, which...

Victor French made deposits of $4,600 at the end of each quarter to Book Bank, which pays 8% interest compounded quarterly. After 5 years, Victor made no more deposits. What will be the balance in the account 4 years after the last deposit?

Solutions

Expert Solution

Step-1:Future Value of annuity at the end of Year 4
Future Value of annuity at the end of Year 4 = Annuity x Future Value of annuity of 1
= $       4,600.00 x 24.29737
= $ 1,11,767.90
Working:
Future Value of annuity of 1 = (((1+i)^n)-1)/i Where,
= (((1+0.02)^20)-1)/0.02 i 8%/4 = 0.02
= 24.29737 n 5*4 = 20
Step-2:Future Value of above amount 4 years after the last deposit
Future Value of balance in accounts 4 years after last deposit = Amount after 5 years x Future Value of 1
= $ 1,11,767.90 x    1.37279
= $ 1,53,433.38
Working:
Future Value of 1 = (1+i)^n Where,
= (1+0.02)^16 i 8%/4 = 0.02
=          1.37279 n 4*4 = 16
Thus,
Balance in the account 4 years after the last deposit will be $ 1,53,433.38

jeff jeffy answered 2 years ago
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