Quarterly contributions of $700 are made to an RRSP that earns 6% compounded monthly. How much will be in the plan immediately after the twentieth deposit?

Question

Quizplus · Accepted Answer

The correct answer is found using the future value of a series formula: $FV = P \times \frac{(1 + r)^n - 1}{r}$, where $P$ is the payment amount, $r$ is the monthly interest rate, and $n$ is the total number of payments. Given a quarterly contribution of $700 at an annual interest rate of 6% compounded monthly, the monthly interest rate is $0.06/12 = 0.005$, and the total number of payments over 5 years (20 quarters) is 20. Plugging these values into the formula gives the future value immediately after the twentieth deposit, which matches option B, $16,198.55.

Quarterly Contributions of $700 Are Made to an RRSP That