Question

A person deposits $100 per month into a savings account for 2 years. If $75 is withdrawn in months 5, 7 and 8 (in addition to the deposits), construct the cash flow diagram to determine how much will be in the account after 2 years at i = 6% per year, compounded quarterly. Assume there is interperiod interest

Answer 1

Deposit = $100 per month

Duration of saving = 2 years = 24 months

$75 is withdrawn in year 5, 7 and 8 in addition to deposit.

i = 6% per year compounded quarterly which is 0.5% per month compounded monthly

Month of deposit	Month for which amount is deposited	Deposit amount	Withdrawn amount	Net Deposit	Future value of deposit
1	23	100	0	100	112.2
2	22	100	0	100	111.6
3	21	100	0	100	111.0
4	20	100	0	100	110.5
5	19	100	75	25	27.5
6	18	100	0	100	109.4
7	17	100	75	25	27.2
8	16	100	75	25	27.1
9	15	100	0	100	107.8
10	14	100	0	100	107.2
11	13	100	0	100	106.7
12	12	100	0	100	106.2
13	11	100	0	100	105.6
14	10	100	0	100	105.1
15	9	100	0	100	104.6
16	8	100	0	100	104.1
17	7	100	0	100	103.6
18	6	100	0	100	103.0
19	5	100	0	100	102.5
20	4	100	0	100	102.0
21	3	100	0	100	101.5
22	2	100	0	100	101.0
23	1	100	0	100	100.5
24	0	100	0	100	100.0
					2,297.9

Amount after 24 months would be 2,297.9