Question

1. Your parents deposited $100 in a bank account for you when you were born. For the first 16-years of your life, the interest rate earned on the account was 6.5%. Since then, rates have fallen considerably and have averaged just 3%. Now you are 30-years of age and want to cash in to fund your property deposit. How much is in your account?

Answer 1

Balance iN account at the end of 16 years : Amount *FVF 6.5%,16

                  = 100 * 2.73901

                    = $ 273.90

Now ,number of years of deposit after 16 years : 30-16 = 14 years

Balance in account at end of 30 years =Balance at 16 years * FVF3%,14

                 = 273.90 * 1.51259

               = $ 414.30

**FVF i%,n = (1+i)^n