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Thread: business math-annunity

  1. #1
    New Member
    Join Date
    Nov 2007
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    Van
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    business math-annunity

    Hi, can someone please check if I did this correctly. Thanks

    How much larger will the value of an RRSP be at the end of 25 years if the contributor makes month-end contributions of $300 instead of year-end contributions of $3,600? In both cases the RRSP earns 6.8% compounded quarterly.

    REQUIRED:
    1. Month-end contributions.
    2. Year-end contributions.

    ANSWERS
    1.

    T : 25 YEARS I=6.8% QUARTERLY PMT 300 PER MONTH
    I=6.8/4=0.017
    I=(1+I) ^m/m2 -1 =(1+0.017)^4/12 -1=0.0056349554
    FV=PMT [ (1+i)^n -1]
    =300 [ (1+i)^25*12-1 ] = 234058.72
    i



    2. 25 years i=6.8/quarterly pmt 3600 per year
    i=o.o17
    i=(1+i)^m/m-1 =(1+0.017)^4/1-1 = 0.06797537355
    FV=3600 [(1+i)^25] =226893.15

  2. #2
    Elite Member
    Join Date
    Apr 2005
    Location
    USA
    Posts
    8,226
    You can always check with "Basic Principles".

    i = 0.068
    i4 = 0.068/4 = 0.017

    [tex]300*\bigsum_{n=0}^{299}\left(1+i4\right)^{\frac{n} {3}}\;=\;234058.7186819[/tex]

    [tex]3600*\bigsum_{n=0}^{24}\left(1+i4\right)^{n*4}\;=\ ;226893.1461705[/tex]

    And there you have it. Good work.

  3. #3
    New Member
    Join Date
    Nov 2007
    Location
    Van
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    thank you

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