Question

Katherine deposit $24500 into a fund at beginning of every quarter for 14 years. she then stopped making deposit into fund and allowed the investment to grow for 3 years. the fund was growing at 6.88% . what was accumlated value of fund at end of year 14 and year 17? also calculate total interest earned over the 17 year period?

Answer 1

Katherine deposits into fund every quater at the beginning = $24,500

Calculating the future vlau eof periodic payment madee for 14 years using Future Value annuity due formula:-

Where, C= Periodic Payments = $24,500

r = Periodic Interest rate = 6.88%/4 = 1.72%

n= no of periods = 14 years*4 = 56

Future Value = $ 2,316,382.17

So, accumulated value of Fund after 14 years = $ 2,316,382.17

For the next 3 years, you earned only Interest, so the Future Value

Future value = $ 2,842,408.10

So, accumulated value of Fund after 17 years = $ 2,842,408.10