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Thread: Compound interest?

  1. #1
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    Compound interest?

    Here is the equation:

    Stephanie started an RRSP on March 1, 2010 with a deposit of $2000. She added 1500 dollars on December 1, 2012 and will add $1800 on September 1, 2014. What will be the accumulated value on her account on December 1, 2021, if interest is 6.5% compounded quarterly?

    I am having a tough time with this one. I believe I need to use PV = FV (1 + i) but am unsure. Can anyone help!
    Last edited by topsquark; Jul 14th 2016 at 01:49 PM. Reason: Fixed LaTeX problem
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  2. #2
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    Re: Compound interest?

    HINTS:

    > Stephanie started an RRSP on Mar 1, 2010 with a deposit of 2000.
    Mar.1/10 to Dec.1/21 = 43 quarters [1]

    >She added 1500 on Dec 1, 2012
    Dec.1/12 to Dec.1/21 = 36 quarters [2]

    >and will add 1800 on Sep 1, 2014
    Sep.1/14 to Dec.1/21 = 29 quarters [3]

    >What will be the accumulated value on her account on Dec 1, 2021,
    >if interest is 6.5% compounded quarterly?

    Quarterly rate = .0625 / 4 = .015625

    [1]: 2000(1.015625)^43
    [2]: 1500(1.015625)^36
    [3]: 1800(1.015625)^29

    Are you ok now?

    NOTE: do not "bump" your posts.
    Helpers here are volunteers.
    Last edited by DenisB; Jul 14th 2016 at 02:12 PM.
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  3. #3
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    Re: Compound interest?

    Thanks for the help. Im still having troubles what formula do you use?
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  4. #4
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    Re: Compound interest?

    You said: PV = FV (1 + i) but am unsure.

    That should be:
    FV = PV (1 + i)^n
    That's quite basic.
    Were you absent when your teacher gave out the formulas?
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  5. #5
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    Re: Compound interest?

    Hello,

    but if we assume, that the quarterly compounded interest is calculated at the end of each quater (as we normally asume that yearly compounded interest is calculated at the end of the year) Stephanie gets her first interest at the end of March 2010 and the calculation becomes a little bit more difficult ... But may be my thoughts are a little bit strange.

    Thomas
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