[MOVED] RRSP calc: value at end of 25 years

missl

New member
Joined
Nov 12, 2007
Messages
33
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.
 

stapel

Super Moderator
Staff member
Joined
Feb 4, 2004
Messages
15,948
What is an "RRSP"? Within what context did this exercise arise? What formula(s) are you supposed to use?

When you reply, please include a clear listing of everything you have tried so far. Thank you! :D

Eliz.
 

Denis

Senior Member
Joined
Feb 17, 2004
Messages
1,723
MissL must be Canadian like me; RRSP = Registered Retirement Savings Plan.

First, you need to calculate 2 rates:
Rate x: the annual rate equivalent to 6.8 cpd quarterly (use with annual deposits)
Rate y: the monthly rate equivalent to this annual rate (use with monthly deposits)

x = (1 + .068/4)^4 - 1
y = (1 + x)^(1/12) - 1

Formula = d[(1 + i)^n - 1] / i
d = regular deposit
i = periodic interest rate
n = number of periods

Value after 25 years:

With annual deposits of $3600:
3600[(1 + x)^25] / x

With monthly deposits of $300:
300[(1 + y)^300] / y

There ya go, MissL.
If you can't follow above, you need a face to face teacher.
 

missl

New member
Joined
Nov 12, 2007
Messages
33
Thanks Dennis. I would go face to face with my teacher. But my courses is corresponding that is why... All we can do is just ask the teacher through email and she just don;t really know how to explain.
 
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