1. An engineer will deposit $8500 every semiannual(first deposit will be 2 years later) into a...

1. An engineer will deposit $8500 every semiannual(first deposit will be 2 years later) into a savings account that pays interest at a rate of 12% per year compounded monthly. How much will be in the account at the end of 10 years?

Solutions

Expert Solution

As the first payment is 2 years later, there will be 16 payments (8*2) made till the end of 10 years.

Interest Rate = 12% per year or 1% per month.

Effective Interest Rate for 6 months =

or Eff. Interest Rate (i) = 0.06152 or 6.152%

so, Number of Period (n) = 16

Payment amount (P) = 8,500

Interest Rate (i) = 0.0615

So, there will be $220,928.6 at the end of 10 years.

ekkarill92 answered 2 years ago

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