Question

Question 7 of 15 Since the birth of his granddaughter, 16 years ago, Jared has deposited $250 at the beginning of every month into a Registered Education Savings Plan (RESP). The interest rate on the plan was 4.50% compounded monthly for the first 9 years and 4.75% compounded monthly for the next 7 years. a. What was the accumulated value of the RESP at the end of 9 years? $0.00 Round to the nearest cent b. What was the accumulated value of the RESP at the end of 16 years? $0.00 Round to the nearest cent c. What was the amount of interest earned over the 16-year period?

Answer 1

a. Accumulated value of the RESP at the end of 9 years = $ 33,365.70

b. Accumulated value of the REST at the end of 16 years = $ 71,407.70

c. Amount of interest earned over the 16 year period = $ 23,407.70

Workings Below:

Monthly Deposit of $250 earns interest of 4.5% for the first 9 years and 4.75% for the next 7 years

Since the interest is monthly compounding, the opening balance in the account also earns interest at the same rate

While the first $250 earns interest for 192 months, the last $250 earns only for one month