Question:
Leslie McCormack is in the spring quarter of her freshman year of college. She and her friends already
are planning a trip to Europe after graduation in a little over three years. Leslie would like to contribute to
a savings account over the next three years in order to accumulate enough money to take the trip.
Assuming an interest rate of 4%, compounded quarterly, how much will she accumulate in three years by
depositing $500 at the end of each of the next 12 quarters, beginning three months from now?
Answer:
Interest is paid for 12 periods at 1% (one-quarter of the annual rate).
FVA = $500 (12.6825) = $6,341
Future value of an ordinary annuity of $1: n = 12, i = 1% (from Table 3)
Leslie McCormack is in the spring quarter of her freshman year of college. She and her friends already
are planning a trip to Europe after graduation in a little over three years. Leslie would like to contribute to
a savings account over the next three years in order to accumulate enough money to take the trip.
Assuming an interest rate of 4%, compounded quarterly, how much will she accumulate in three years by
depositing $500 at the end of each of the next 12 quarters, beginning three months from now?
Answer:
Interest is paid for 12 periods at 1% (one-quarter of the annual rate).
FVA = $500 (12.6825) = $6,341
Future value of an ordinary annuity of $1: n = 12, i = 1% (from Table 3)
