Linda will make month-end deposits of 2,000 for 6 years staring in one month. She earns...

Linda will make month-end deposits of 2,000 for 6 years staring in one month. She earns an interest rate of 4.4% p.a. compounded monthly for the first 2 years and 8.1% p.a. compounded monthly thereafter. How much will she have in 6 years? Correct your answer to the nearest cent without any units. (Do not use "$" or "," in your answer. e.g. 12345.67)

Expert Solution

Solution.>

The correct answer is $182,098.18

I have solved this question in Excel. The formula used are written along with the values. If you still have any doubt, kindly ask in the comment section.

Firstly we have to find the amount Linda must have after 2 years at 4.4% p.a. compounded monthly. Hence we calculate the FV after two years as shown below.

Then we have to find the amount he must after 4 years at 8.1% p.a. compounded monthly. Hence the FV calculated above will now becomes the Present Value in this case.

The formula used in excel is = FV(Rate/12,NPER*12,-PMT,-PV)

It has been shown in the excel below.

Note: Give it a thumbs up if it helps! Thanks in advance!

jeff jeffy answered 1 year ago

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