If deposits of $9,900 invested at the end of every six months earn 13% compounded quarterly, how long will it take to accumulate $295,000?

Question

Quizplus · Accepted Answer

The correct answer is found by using the formula for the future value of a series: $FV = P \times \frac{(1 + r)^n - 1}{r}$, where $FV$ is the future value of the annuity, $P$ is the payment per period, $r$ is the interest rate per period, and $n$ is the total number of payments. Given that the interest is compounded quarterly but payments are made semi-annually, we adjust the annual interest rate to a per period rate by dividing by 4 (for quarterly compounding) but calculate $n$ based on semi-annual payments. The goal is to solve for $n$ when $FV = \$295,000$, $P = \$9,900$, and the annual interest rate is 13% or 0.13, leading to a per period rate of $0.13/4 = 0.0325$ for quarterly compounding. However, since the compounding frequency does not match the payment frequency, a direct application of this formula requires adjustments or iterative methods to account for the difference in compounding versus payment periods. The correct approach involves recognizing the need for an iterative solution or using financial calculators or software designed to handle such calculations, taking into account the effective interest rate per payment period and the actual compounding effect. Given the complexity of directly solving this with the provided information and without specifying the iterative steps or calculations, the key insight is understanding that the process involves calculating the time it takes for regular investments to grow to a specified amount under compound interest, which typically requires numerical methods or financial functions available in spreadsheets or financial calculators.

If Deposits of $9,900 Invested at the End of Every