In: Finance
For the last 7 years Andy has made deposits of $108.00 at the end of every six months earning interest at 11 % compounded semi-annually. If he leaves the accumulated balance for another 9 years at 11% compounded monthly, what will the balance be in the account?
Information provided:
Semi-annual deposit= $108
Time= 7 years*2= 14 semi-annual periods
Interest rate= 11%/2= 5.50% per semi-annual period
The question is solved by calculating the future value.
Enter the below in a financial calculator to compute the future value.
PMT= -108
N= 14
I/Y= 5.50
Press the CPT key and FV to compute the future value.
The value obtained is 2,191.60.
Therefore, Andy will have accumulated $2,191.60 at the end of 7 years.
Information provided:
Present value= 2,191.60
Time= 9 years*12= 108 months
Interest rate= 11%/12= 0.9167% per month
Next, the question is solved by calculating the future value at the end of 9 years.
Enter the below in a financial calculator to compute the future value.
PV= -2,191.60
N= 108
I/Y= 0.9167
Press the CPT key and FV to compute the future value.
The value obtained is 5,871.57.
Therefore, Andy will have a balance of $5,871.57 in the account.
In case of any query, kindly comment on the solution.