Question

When Louis Martin was born, her father deposited $2000 in a savings account in her name at a savings and loan association (S&L). At the time, the S&L paid 6% interest compounded semi annually. After 10 years, the S&L changed to a rate of 6% compounded quarterly. What was the value of the account after 18 years when the money was withdrawn to help pay for her college expenses

Answer 1

FV= $5,812.85

Step-by-step explanation:

To calculate the future value, we need to use the following formula:

FV= PV*(1+i)^n

First investment:

PV= 2,000

i= 0.06/2= 0.03

n= 10*2= 20

FV= 2,000*(1.03^20)

FV= $3,612.22

Second investment:

PV= 3,612.22

i= 0.06/4= 0.015

n= 8*4= 32

FV= 3,612.22*(1.015^32)

FV= $5,812.85