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October 21, 2025, 05:18:11 pm
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Author Topic: help please  (Read 1042 times)  Share 

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abzzzz

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help please
« on: October 30, 2011, 09:27:48 pm »
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Rebecca invested $4000 at 5.0% per annum with interest compounding quarterly.
After interest is paid at the end of each quarter, Rebecca adds $800 to her investment.
The value of her investment at the end of the second quarter, after the $800 has been added, is closest to
A. $4101
B. $4901
C. $4911
D. $5711
E. $6060
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crispix

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Re: help please
« Reply #1 on: October 30, 2011, 09:57:25 pm »
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4000 x 1.0125 = 4050
4050 + 800 = 4850
4850 x 1.0125 = 4910.63
4910.63 + 800 = 5710.63 = ~$5711

Answer is D
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abzzzz

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Re: help please
« Reply #2 on: October 30, 2011, 10:05:15 pm »
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sorry but where does 1.0125 come from  ???
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crispix

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Re: help please
« Reply #3 on: October 30, 2011, 10:14:48 pm »
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interest rate per annum is 5% right? that means interest rate per quarter is 1.25% as 5/4 = 1.25.
therefore to since the investment increased by 1.25% in each quarter, you times the balance in the quarter by 1.0125
Otherwise you could just use the TVM solver...

N = 2 (end of second)
I = 5 (since this is per annum)
PV = -4000 (initial investment)
PMT = -800 (since your depositing 800 every quarter)
FV = ? (this is what your trying to find out
PPY = 4 (quarterly)
CPY = 4
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