Explore BrainMass

Explore BrainMass

    Time Value of Money

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    Beverly started a paper route on January 1, 1995. Every three months, she deposits $300 in her bank account, which earns 8 percent annually but is compounded quarterly. On December 31,1998, she used the entire balance in her bank account to invest in a certificate of deposit at 12 percent annually. How much will she have on December 31, 2001?

    © BrainMass Inc. brainmass.com February 24, 2021, 2:29 pm ad1c9bdddf
    https://brainmass.com/business/the-time-value-of-money/time-value-money-paper-route-23962

    Solution Preview

    FVIF= Future Value Interest Factor
    FVIFA= Future Value Interest Factor for an Annuity
    FVIF( n, r%)= =(1+r%)^n
    FVIFA( n, r%)= =[(1+r%)^n -1]/r%

    Step 1:

    We will have to calculate the Future Value (FV) of 300
    deposited quarterly for ...

    Solution Summary

    The solution calculates Future Value for annuity (quarterly compounding) which is again invested in a certificate of deposit (annual compounding).

    $2.19

    ADVERTISEMENT