Ricardo is aware that he should save as much as possible early in his career while his personal responsibilities are minimal. Therefore he has adopted an aggressive savings plan – put aside $1,500 in his TFSA at the beginning of each month for a year. (He has never contributed to a TFSA and has sufficient contribution room.) Ricardo’s savings are expected to earn 2% per annum, compounded semi-annually and he will make his first contribution 6 months from today. How much will he have in his TFSA in 2 years’ time if no further contributions are made?
Month | Investment In TFSA | Interest 2% per annum | Compunded amount |
1 | 0 | 0 | 0 |
2 | 0 | 0 | 0 |
3 | 0 | 0 | 0 |
4 | 0 | 0 | 0 |
5 | 0 | 0 | 0 |
6 | 0 | 0 | 0 |
7 | 1500 | 2.5 | 1502.5 |
8 | 1500 | 5 | 3007.5 |
9 | 1500 | 7.5 | 4515 |
10 | 1500 | 10 | 6025 |
11 | 1500 | 12.5 | 7537.5 |
12 | 1500 | 15 | 9052.5 |
13 | 1500 | 17.5875 | 10570.09 |
14 | 1500 | 20.0875 | 12090.18 |
15 | 1500 | 22.5875 | 13612.76 |
16 | 1500 | 25.0875 | 15137.85 |
17 | 1500 | 27.5875 | 16665.44 |
18 | 1500 | 30.0875 | 18195.53 |
19 | 0 | 30.325875 | 18225.85 |
20 | 0 | 30.325875 | 18256.18 |
21 | 0 | 30.325875 | 18286.50 |
22 | 0 | 30.325875 | 18316.83 |
23 | 0 | 30.325875 | 18347.15 |
24 | 0 | 30.325875 | 18377.48 |
Correct answer is B
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