a) the period where they are making deposits is a future value annuity, so use the future value annuity formula to find out how much is in the account after 8 years:
FV = R[(1+I)^n]/i
(Remember that the regular deposit, R, is 2*1875)
The period where their money sits and collects interest is a compound interest situation. Use the formula:
A = P(1+i)^n
(Use the FV value you obtained above, as P)
b) add up how much they both deposited over the 8 years.
c) answer to a) - answer to b)
Mr. and Mrs. Fox have each contributed $1825.00 per year for the last eight years into RRSP accounts earning 6.93% compounded annually. Suppose they leave their accumulated contributions for another five years in the RRSP at the same rate of interest.
a) How much will Mr. and Mrs. Fox have in total in their RRSP accounts?
b) How much did the Fox's contribute?
c) How much will be interest??
1 answer
1 answer