Question

b) Suzette makes deposits of $500.00 at the beginning of each quarter for 10 years into an account earning 8% quarterly. Find the amount in Suzette’s account after 10 years.

Answer 1

In this case, the payments is being made in the beginning of the perios which is the case of annuity due.

Future Value of Annuity Due = [P * [( 1 +R)^N - 1] / R] * ( 1 +R)

Where, P = Principal

R = Rate of Interest Per period

N = Number of Payments

Period = 4 [ In a Year]

Number of Payments = 10*4

= 40

Rate of Interest = 8%/4

= 2%

= [500 * [( 1 +2%)^40 - 1 ] / 2%] * ( 1 +2%)

= [500 * [(1.02^40 - 1] / 0.02] * 1.02

= [500 * 60.4019831] * 1.02

=30805.011381

So, Suzette will have 30805.011381