Question

Mr. Kinders has contributed $121 at the end of each six months into an RRSP paying 5% per annum compounded quarterly.

a) how much will Mr. Kinders have in the RRSP after 18 years?
b) how much of the above amount is interest?

Answer 1

To find the total amount in the RRSP after 18 years, use the formula for compound interest: A = P(1 + r/n)^(nt). Plugging in the given values, Mr. Kinders will have approximately $4576.22. The amount of interest earned is $4455.22.

Step-by-step explanation:

To calculate the amount Mr. Kinders will have in the RRSP after 18 years, we can use the formula for compound interest:

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

Where:

• A is the total future amount
• P is the principal (initial deposit)
• r is the annual interest rate
• n is the number of times interest is compounded per year
• t is the number of years

Plugging in the values from the given information, we have:

A = 121(1 + 0.05/4)^(4*18)

Solving this equation, we find that Mr. Kinders will have approximately $4576.22 in the RRSP after 18 years.

To find the amount of interest, we simply subtract the principal from the total future amount:

Interest = A - P = $4576.22 - $121 = $4455.22