Answer:
Value of deposit after 15 years is $264,581.64
Explanation:
Given:
Amount deposited every year for 8 years = $14,000
Compound interest rate = 4%
It is an annuity as same amount is deposited every year. Using present value of annuity table to compute the value of deposits at present.
Present value of annuity factor at 4%, 8 years is 6.7327
Present value of deposits = 14,000 × 6.7327
= $94,257.8
This amount is deposited another account earning 7% semi-annually. Annual rate will be 7÷2 = 3.5%
Compounding period is 15×2=30 periods
Value of deposit after 15 years = [tex]P\times (1+i)^{n}[/tex]
where, P is present value of deposits that is $94,257.8
i = 0.035
n = 30
Substitute these values in the above formula:
Value of deposit after 15 years = [tex]94,257.8\times (1+0.035)^{30}[/tex]
= 94,257.8 × 2.807
= $264,581.64
