Question

1. Lucy deposited $1,300 at the end of every month into an RRSP for 9 years. The interest rate earned was 4.50% compounded semi-annually for the first 3 years and changed to 4.75% compounded monthly for the next 6 years. What was the accumulated value of the RRSP at the end of 9 years? ( pls give me solution too )

2. While buying a new car, Helen made a down payment of $1,100.00 and agreed to make month-end payments of $290.00 for the next 3 years and 5 months. If she was charged an interest rate of 1.00% compounded quarterly for the entire term, answer the following, rounding to the nearest cent.

a. What was the cost of the car when Helen purchased it?

b. What was the total amount of interest paid over the term?

Answer 1

Part 1:

Interest rate of 4.5% and 4.75% compounded semi annually are equivalent to monthly rates of 0.371532% and 0.391972%, as follows:

Accumulated value at the end of 9 years = $ 86,983.94

Calculation using the FV function of Excel as follows:

Interest rate of 1% compounded quarterly is equivalent to monthly rate of 0.083264%, as follows:

Part 2 (a):

Amount of loan= $ 11,684.56   Calculated using PV function of Excel.

Together with down payment, cost of the car= $ 12,784.56

Part 2 (b):

Total interest paid over the term= $205.44

Details of calculation as follows: