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With an initial deposit of $10 000, Ibrahim opened an RRSP on August 1, 2018. He...

With an initial deposit of $10 000, Ibrahim opened an RRSP on August 1, 2018. He added $1800 on January 1, 2019 and another $2500 on July 1, 2019. How much is available in his account to start school on September 1, 2019 if the account offers 5.2% compounded quarterly?

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Answer #1

Intial Deposit = $10 000 on August 1, 2018

added amount =  $1800 on January 1, 2019

another deposit = $2500 on July 1, 2019

How much is available in his account to start school on September 1, 2019

August 1, 2018 - September 1, 2019 = 13months = 13/12 = 1.083 years

January 1, 2019 - September 1, 2019 = 8 months = 8/12 = 0.667 years

July 1, 2019 - September 1, 2019 = 2 months = 2/12 = 0.167 years

Future value = Present value * (1+r)n

Interest rate = 5.2% (compounded quarterly) then r =5.2 / 100*4 = 0.013

then

FV of Intial Deposit = 10000*(1+0.013)1.083*4

= 10,575.66

Next deposit = 1800*(1+0.013)0.667*4

   = 1863.08

another deposit = 2500*(1+0.013)0.167*4

  = 2521.62

available in his account to start school on September 1, 2019 = 10,575.66+1863.08+2521.62

= $14,960.36

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