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?
A) $14,685.38
B) $16,198.55
C) $12,190.19
D) $16,442.74
E) $12,009.15

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 that the interest rate is 6% compounded monthly, $r = 0.06/12 = 0.005$. With quarterly contributions, there are 4 contributions per year, so for 5 years (20 quarters), $n = 20$. Plugging these values into the formula gives the future value immediately after the twentieth deposit. Calculating with $P = 700$, $r = 0.005$, and $n = 20$, we find the future value to be approximately $16,198.55.

Quarterly Contributions of $700 Are Made to an RRSP That