Question

You plan to make 20 annual deposits into your RRSP starting with 1000 and increasing thereafter by 3.7% a. What will be the size of the 20th deposit? b. What will be the total amount deposit?

Answer 1

The size of the 20th deposit is approximately $1,751.55, and the total amount deposited is $20,185.

Step-by-step explanation:

To determine the size of the 20th deposit, we can use the formula for compound interest. The initial deposit is $1000, and it increases by 3.7% each year. So, the 20th deposit can be calculated as follows:

20th deposit = 1000(1 + 0.037)^19

By evaluating this expression, the size of the 20th deposit is approximately $1,751.55.

To find the total amount deposited, we can use the formula for the sum of an arithmetic series. The first term is $1000, and the common difference is $37 (3.7% of $1000). So, the total amount deposited can be calculated as follows:

Total amount deposited = (20/2)(2 * 1000 + (20 - 1) * 37)

By evaluating this expression, the total amount deposited is $20,185.