Question

If your P200 is deposited in a savings account at the beginning of each 15 years and the account draws interest at 7% per year, compounded annually, the value of the account at the end of 15 years will be most nearly

Answer 1

If P200 is deposited at the beginning of in each 15 years, then the total amount will be in the account after 15 years at 7% interest rate is -

P200(F/A, 7%, 15)(F/P, 7%, 1)

= P200*[{(1+0.07)^15 - 1}/0.07](1+0.07)^1

= P200*25.129*1.07

= P 5,025.8*1.07 = P 5,377.60 = P 5,378 (Approx). (Answer)

The value of account after 15 years will be most nearly to P5378. (Ans).

[Note: Here the last term (1+0.7)^1 gives after 15th year. The term (F/A, 7%, 15) gives the value at the beginning of 15th year].