At the end of every 3 months, Judy deposits $100 into an account that pays 6%...

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?

Expert Solution

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?

Rahul Sunny answered 9 months ago

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