Question

Sarah contributes $225.00 at the beginning of every six months into an RRSP paying interest at 8.9% compounded semi-annually. a) How much will her RRSP deposits amount to in 31.5 years? b) How much of the amount will be interest?

Answer 1

Sarah's RRSP deposits will amount to approximately $45,296.13 in 31.5 years, and the amount of interest will be approximately $30,046.13.

Step-by-step explanation:

To find the amount of Sarah's RRSP deposits in 31.5 years, we can use the formula for compound interest:

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

Where:

• A is the final amount
• P is the principal amount (contributions)
• r is the annual interest rate (0.089 in this case)
• n is the number of times interest is compounded per year (2 in this case)
• t is the number of years (31.5 in this case)

Plugging in the values, we get:

A = 225(1 + 0.089/2)^(2*31.5)

A = 225(1.0445)^63 = $45,296.13

Therefore, Sarah's RRSP deposits will amount to approximately $45,296.13 in 31.5 years.

To find the amount of interest, we can subtract the principal amount from the final amount:

Interest = A - P = $45,296.13 - $225(63) = $30,046.13

Therefore, the amount of interest will be approximately $30,046.13.