Question

In: Finance

Determine the accumulated value of quarterly deposits which grow by $18 each quarter for 12 years,...

Determine the accumulated value of quarterly deposits which grow by $18 each quarter for 12 years, with a first payment of $310 one quarter from now, if the deposits earn 1.3%/year compounded quarterly.

Solutions

Expert Solution

The stream of deposits contain two parts:

(a) The uniform fixed amount of $310 every quarter

(b) Arithmetic gradient of $18 every quarter

Uniform series payment in lieu of the gradient is   $411.80 calculated as follows:

Total uniform series deposits per quarter= $310 + $411.80 = $721.80

Amount accumulated over 12 years period is the Future Value of annuity comprising of this total uniform series deposits. The value is   $37,429.35 calculated as follows:


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