Question

In: Finance

For the last 7 years Andy has made deposits of ​$108.00 at the end of every...

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?

Solutions

Expert Solution

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.


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