Question

Canada Premium Bonds pays 4% annual real rate of return compounded daily. John wants to invest $50 bi-weekly as a part of his engineering company payroll project. The inflation rate is assumed to be 3% per year over the next 8 years, what is the purchasing power of John’s bonds 8 years from now?

Answer 1

Sum of an A.P.

1+r+r²+r³+....+r^n-1+rⁿ = (rⁿ⁺¹-1)/(r-1)

Its proof can be found in any standard algebra textbook.