In: Economics
At the end of every 3 months, Judy deposits $100 into an account that pays 6% compounded quarterly. After 4 years she puts the accumulated amount into a certificate of deposit paying 7.5% compounded semi-annually for 1 year. When this certificate matures how much will Judy have accumulated?
Here, A = 100
i = 6% / 4 = 1.5%
n = 4 * 4 years = 16
The amount accumulated at the end of 4 years = A(F/A, i, n)
= 100(F/A, 1.5%, 16)
= 100(17.93237)
= $1,793.237
Again, when $1,793.2 is deposited in a certificate of deposit:
P = 1,793.237
i = 7.5 % / 2 = 3.75%
n = 2
Future value = P(1 + i)n
= 1,793.237(1 + 0.0375)2
= $1,930.25
Thus, when this certificate matures $1,930.25l Judy will have accumulated?