Question

From “Different Rates” Section: Quid Pro Quo moves $1,500,000 installments, every three months, into a tax haven account for the past six years, where it earns interest on a quarterly basis. The first eight installments earned a nominal rate of 5%, the next eight installments earned a nominal rate of 8%, and the last eight installments earned a nominal rate of 12%. What is the current value of the account? Show work.

Answer 1

The current value of the account is $49,216,114.

Period	Installments (A)	Carry forward (B)	Total (C)=(A) +(B)	Interest rate for 3 months (D)	Interest amount (E)= (C)*(D)	Total value (C)+ (E)
1	1,500,000	-	1,500,000	1.25%	18,750	1,518,750
2	1,500,000	1,518,750	3,018,750	1.25%	37,734	3,056,484
3	1,500,000	3,056,484	4,556,484	1.25%	56,956	4,613,440
4	1,500,000	4,613,440	6,113,440	1.25%	76,418	6,189,858
5	1,500,000	6,189,858	7,689,858	1.25%	96,123	7,785,982
6	1,500,000	7,785,982	9,285,982	1.25%	116,075	9,402,056
7	1,500,000	9,402,056	10,902,056	1.25%	136,276	11,038,332
8	1,500,000	11,038,332	12,538,332	1.25%	156,729	12,695,061
9	1,500,000	12,695,061	14,195,061	2.00%	283,901	14,478,963
10	1,500,000	14,478,963	15,978,963	2.00%	319,579	16,298,542
11	1,500,000	16,298,542	17,798,542	2.00%	355,971	18,154,513
12	1,500,000	18,154,513	19,654,513	2.00%	393,090	20,047,603
13	1,500,000	20,047,603	21,547,603	2.00%	430,952	21,978,555
14	1,500,000	21,978,555	23,478,555	2.00%	469,571	23,948,126
15	1,500,000	23,948,126	25,448,126	2.00%	508,963	25,957,089
16	1,500,000	25,957,089	27,457,089	2.00%	549,142	28,006,230
17	1,500,000	28,006,230	29,506,230	3.00%	885,187	30,391,417
18	1,500,000	30,391,417	31,891,417	3.00%	956,743	32,848,160
19	1,500,000	32,848,160	34,348,160	3.00%	1,030,445	35,378,605
20	1,500,000	35,378,605	36,878,605	3.00%	1,106,358	37,984,963
21	1,500,000	37,984,963	39,484,963	3.00%	1,184,549	40,669,512
22	1,500,000	40,669,512	42,169,512	3.00%	1,265,085	43,434,597
23	1,500,000	43,434,597	44,934,597	3.00%	1,348,038	46,282,635
24	1,500,000	46,282,635	47,782,635	3.00%	1,433,479	49,216,114