Since the birth of his daughter, 16 years ago, Ali has deposited $75 at the beginning of every month into a Registered Education Savings Plan (RESP). The interest rate on the plan was 5.80% compounded monthly for the first 8 years and 3.60% compounded monthly for the next 8 years.
a. What would be the accumulated value of the RESP at the end of 8 years?
b. What would be the accumulated value of the RESP at the end of 16 years?
c. What is the amount of interest earned during the 16 year period?
What would be the accumulated value of the RESP at the end of 8 years
=(75*(((1+(5.80%/12))^(8*12)-1)/(5.80%/12)))*(1+(5.80%/12))
=9178.32
What would be the accumulated value of the RESP at the end of 16 years
=((75*(((1+(5.80%/12))^(8*12)-1)/(5.80%/12)))*(1+(5.80%/12)))*(1+(3.60%/12))^(8*12)+(75*(((1+(3.60%/12))^(8*12)-1)/(3.60%/12)))*(1+(3.60%/12))
=20590.92
What is the amount of interest earned during the 16 year period
=20590.92-(75*16*12)
=6190.92
Since the birth of his daughter, 16 years ago, Ali has deposited $75 at the beginning...
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