Question

Your best friend opened an investment account with a deposit of $151 today. They will continue to deposits every two weeks into an account that they hope will earn an interest rate of 8.82% per year. How much will they have in 7 years?

Answer 1

Given,

Bi-weekly deposit = $151

Interest rate = 8.82% or 0.0882

No. of years = 7 years

Solution :-

Bi-weekly interest rate (r) = 0.0882/26 = 0.00339230769

Bi-weekly periods (n) = 7 years x 26 = 182

Future value = Bi-weekly deposits/r x [(1 + r)ⁿ - 1] x (1 + r)

= $151/0.00339230769 x [(1 + 0.00339230769)¹⁸² - 1] x (1 + 0.00339230769)

= $44512.4716856 x [(1.00339230769)¹⁸² - 1] x (1.00339230769)

= $44512.4716856 x [1.85216487286 - 1] x (1.00339230769)

= $44512.4716856 x 0.85216487286 x 1.00339230769 = $38060.64

Thus, they will have $38060.64 in 7 years.