Question

Regular investments made at the beginning of each quarter earn 1% compounded quarterly. How many more $1000 investments than $1100 investments will it take to accumulate $84,000? (Do not round intermediate calculations and round up the number of investments.) It will take more payment(s).

Answer 1

We are given,

Interest rate = 1%

Future value = $84,000

We can calculate number of periods/payments required in excel,

a) When Quarterly payments = $1,000

pmt	1000
Rate	1%
Future Value	84,000
No of periods	60.83	(=NPER(1%,1000,0,-84000,1))

b) When Quarterly payments = $1,100

pmt	1100
Rate	1%
Future Value	84,000
No of periods	56.59	(=NPER(1%,1100,0,-84000,1))

No of payments required so that FV is equal in both cases = 60.83 - 56.59 = 4.23 or 4(rounding off).

Hence it will take 4 more payments of $1,000 to equal FV with $1,100 payments.

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