Homework Answers
Quarterly Savings Deposits = $ 450, Deposit Tenure = 5 years or (5 x 4) = 20 quarters, Annual Interest Rate = 5.5 % compounded monthly, Investment Horizon = 10 years
Applicable Monthly Rate = (5.5/12) = 0.4583 %
Effective Quarterly Rate = (1.004583)^(3) - 1 = 0.01381 or 1.381 %
Future Value of Quarterly Deposits at the end of Year 5 = 450 x (1.01381)^(19) + 450 x (1.01381)^(18) +............+ 450 x (1.01381)^(2) + 450 x (1.01381) + 450 = $ 10284.6
Future Value of the Account at the end of Year 10 = 10284.6 x [(1.01381)^(20)] = $ 13530.65
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