Question

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For the last 7 years, Joseph has made deposits of ​$150.00 at the end of every...

For the last 7 years, Joseph has made deposits of ​$150.00 at the end of every year earning interest at 6 % compounded annually. If he leaves the accumulated balance for another 8 years at 5 % compounded semi dash annually comma what will the balance be in the​ account?

The balance will be $________.

Solutions

Expert Solution

The question is solved in two parts. First, the future value of the deposit for the first 7 years needs to be calculated.

Information provided:

Annual deposit= $150

Time= 7 years

Interest rate= 6%

Enter the below in a financial calculator to compute the future value:

PMT= 150

N= 7

I/Y= 6

Press the CPT key and FV to compute the future value.

The value obtained is 1,259.08.

Therefore, the value of the account at the end of 7 years is $1,259.08.

Next, the balance of the account for another 8 years is calculated by computing the future value.

Information provided:

Present value= 1,259.08

Time= 8 years*2= 16 semi-annual periods

Interest rate= 5%/2= 2.50% per semi-annual period

Enter the below in a financial calculator to compute the future value:

PV= -1,259.08

N= 16

I/Y= 2.50

Press the CPT key and FV to compute the future value.

The value obtained is 1,869.11.

Therefore, the balance in the account is $1,869.11.

In case of any query, kindly comment on the solution.

jeff jeffy answered 3 weeks ago
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