Ted deposited​ $1750 in an RRS

Ted deposited​ $1750 in an RRSP on March​ 1, 2014, at​ 3%compounded quarterly. Subsequently the interest rate was changedto​ 4% compounded monthly on September​ 1, 2016, and to​ 4.5%compounded​ semi-annually on June​ 1, 2018. What was the value ofthe RRSP deposit on December​ 1, 2020, if no further changes ininterest were​ made?


Particulars Amount
Given APR 3.00%
Given compounding frequency per year 4
Effective annual rate 3.034%
(1+ 0.03/4)^4 -1
Required compounding frequency per year 12
Monthly effective rate 0.2494%
(1+ 0.03033919)^1/12 -1
Required APR 2.99253%
Particulars Amount
Given APR 4.50%
Given compounding frequency per year 2
Effective annual rate 4.551%
(1+ 0.045/2)^2 -1
Required compounding frequency per year 12
Monthly effective rate 0.3715%
(1+ 0.04550625)^1/12 -1
Required APR 4.45838%

Appropriate monthly APR rates were above for compounding ratesother than monthly given.

Particulars Amount
Deposit 1,750.00
× FVF until Sep 2016    1.07758
Future value in Sep 1,2016 1,885.77
× FVF until Jun 2018    1.07238
Future value in Jun 2018 2,022.27
× FVF until Dec 2020    1.11768
Future value in Dec 2020 2,260.24

Answer is:


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