Beverly Hills started a paper route on January 1. Every three months, she deposits $950 in her bank account, which earns 8 percent annually but is compounded quarterly. Four years later, she used the entire balance in her bank account to invest in an investment at 10 percent annually. How much will she have after three more years? Use Appendix A and Appendix C for an approximate answer, but calculate your final answer using the formula and financial calculator methods.

Question

Baylee Allison

Business

30 September, 03:03

Beverly Hills started a paper route on January 1. Every three months, she deposits $950 in her bank account, which earns 8 percent annually but is compounded quarterly. Four years later, she used the entire balance in her bank account to invest in an investment at 10 percent annually. How much will she have after three more years? Use Appendix A and Appendix C for an approximate answer, but calculate your final answer using the formula and financial calculator methods.

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Answers (1)

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Chewy · Answer 1

Instructions are listed below.

Explanation:

Giving the following information:

Every three months, she deposits $950 in her bank account, which earns 8 percent annually but is compounded quarterly. Four years later, she used the entire balance in her bank account to invest in an investment at 10 percent annually.

We need to use the following formula:

FV = {A*[ (1+i) ^n-1]}/i

A = annual deposit

First four years:

A = 950

n = 16

i = 0.08/4 = 0.02

FV = {950*[ (1.02^16) - 1]}/0.02 = 17,707.32

Next three years:

FV = PV * (1+i) ^n

FV = 17,707.32 * (1.10) ^3 = $23,568.44