Question

Luis invested $2,100 at the beginning of every 6 months in an RRSP for 11 years. For the first 7 years it earned interest at a rate of 3.60% compounded semi-annually and for the next 4 years it earned interest at a rate of 5.60% compounded semi-annually. a. Calculate the accumulated value of his investment at the end of the first 7 years.

A)$60,568.38
B)$61,087.55
C)$33,100.18
D)$33,695.98

Answer 1

The accumulated value of the investment at the end of the first 7 years is $60,568.38.

Step-by-step explanation:

To calculate the accumulated value of Luis's investment at the end of the first 7 years, we will use the future value of a series formula for an annuity with compound interest. Since Luis invests $2,100 semi-annually, and the interest rate for the first 7 years is 3.60% compounded semi-annually, the formula we will use is:

A = P (1 + r/n)^nt

Where:

• A is the accumulated value
• P is the principal amount ($2,100)
• r is the interest rate per period (3.60% per year)
• n is the number of compounding periods per year (2)
• t is the number of years (7)

Plugging in the values:

A = 2100 (1 + 0.036/2)^(2*7)

A = $60,568.38

Therefore, the accumulated value of the investment at the end of the first 7 years is $60,568.38.