Question
Sigrid contributed $200 every month for nine years into an RRSP earning 4.3% compounded annually. She then converted the RRSP into an annuity that pays her monthly for 20 years. If the first payment is due one month after the conversion, and interest on the annuity is 5.4% compounded semi-annually, how much will Sigrid receive at the end of every month?
Answers
Leo Galleguillos
Any idea how to get started on this? Where are you getting stuck?
the future value of the RRSP is
(200*12)((1+.043)^9-1)/(1.043-1) = 25713.07
Note that since the interest is only compounded annually, you just work with a single yearly contribution.
If it were compounded monthly, it'd be 200((1+.043/12)^(12*9)-1)/(1.043-1)
Now just drag out your formula for annuity amortization...
(200*12)((1+.043)^9-1)/(1.043-1) = 25713.07
Note that since the interest is only compounded annually, you just work with a single yearly contribution.
If it were compounded monthly, it'd be 200((1+.043/12)^(12*9)-1)/(1.043-1)
Now just drag out your formula for annuity amortization...
380.67
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