Question

Adrian deposited $1,400 at the end of every month into an RRSP for 8 years. The interest rate earned was 4.50% compounded semi-annually for the first 3 years and changed to 4.75% compounded monthly for the next 5 years. What was the accumulated value of the RRSP at the end of 8 years?

Answer 1

Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

ДА Monthly deposit APR, compounded semi-annual Monthly interest rate No. of deposit in 3 years $1,400.00 4.50% 0.3715% 36 Value of Account at end of Year-3 $53,819.22 2 PMT 3 4 1/4 5 N 6 7 FV 8 9 10 PV 11 PMT 12 13 1/Y Value of Account at end of Year-3 Monthly deposit APR, compounded monthly Monthly interest rate No. of deposit in next 5 years $53,819.22 $1,400.00 4.75% 0.3958% 60 14 N 15 16 EV Accumulated value of the RRSP at end of Year 8 $162,818.51 18

Cell reference -

A B 2 PMT 1/ Monthly deposit APR, compounded semi-annual Monthly interest rate No. of deposit in 3 years 1400 0.045 = (1+03/2)^(1/6)-1 1=3*12 Value of Account at end of Year-3 =FV(C4,C5,-C2,,0) 5N 6 7 FV 8 9 10 PV 11 PMT 12 13 1/Y 14 N 15 16 FV 17 18 =B7 Monthly deposit APR, compounded monthly Monthly interest rate No. of deposit in next 5 years =C7 1400 0.0475 =C12/12 =5*12 Accumulated value of the RRSP at end of Year 8 =FV(C13, C14,-C11,-C10,0)

Hope it will help, please do comment if you need any further explanation. Your feedback would be highly appreciated.