Question

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?

1. $18,195
2. $18,377
3. $18,407
4. $18,502

Answer 1

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