Fill This Form To Receive Instant Help
Fill This Form To Receive Instant Help
Homework answers / question archive / Tony deposits $2000 into a savings account for his daughter when she is born followed by quarterly payments of $400 at the end of each quarter until there is $30,000 in the fund
Tony deposits $2000 into a savings account for his daughter when she is born followed by quarterly payments of $400 at the end of each quarter until there is $30,000 in the fund. How many years will it take for the savings account to reach $30,000 if it earns 3.5% compounded semi-annually for the entire time?
A)
15.776 years
B)
31.551 years
C)
26.526 years
D)
13.263 years
E)
13.175 years
Computation of Number of Years using NPER Function in Excel:
=nper(rate,-pmt,pv,fv)/4
Here,
Nper = Number of Years = ?
Rate = ((1+3.5%/2)^2 - 1)/4 = 0.883%
PMT = $400 per quarter
PV = $2,000
FV = $30,000
Substituting the values in formula:
=nper(0.883%,-400,2000,30000)/4
Nper or Number of Years = 15.736 Years
The correct option should be A "15.776 years". The difference is due to rounding off figures.
