Ali contributed $1,500 per year for the past 8 years into an RRSP account, earning 3.8%...
Ali contributed $1,500 per year for the past 8 years
into an RRSP account, earning 3.8% compounded annually. If he
leaves the accumulated contributions for another 5 years in the
RRSP at the same rate of interest,
a) How much will Ali have in total in his RRSP account?
b) How much did Ali contribute?
c) How much will be the interest?
Homework Answers
| a) | PV of annuity = | P((1+r)^n-1)/r | |
| P = Periodic payment | |||
| r = rate per period | |||
| n = number of period | |||
| FV of annuity = | 1500((1.038)^8-1)/0.038 | ||
| FV of annuity = | $13,723 | ||
| b) | Contribution by Ali = | $12,000 | (1500*8) |
| c) | Total interest | $1,723 | (13723-12000) |
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