You deposit $5000 into a fund earning j₂ = 6%.Each succeeding semi-annual deposit is increased by 4%.What is the accumulated value immediately after your 15^th deposit? (Answer to nearest dollar)

Question

Quizplus · Accepted Answer

This problem involves calculating the future value of a growing annuity, where the payments increase at a constant rate each period. The formula for the future value of a growing annuity is FV = P * [((1 + r)^n - (1 + g)^n) / (r - g)], where P is the initial payment, r is the interest rate per period, g is the growth rate of the payments, and n is the number of periods. Here, P = $5000, r = 3% per semi-annual period (since the annual rate is 6%), g = 2% per semi-annual period (since the growth is 4% per year), and n = 15*2 = 30 semi-annual periods. Plugging these values into the formula and solving gives a future value close to the option B, $121,488.

You Deposit $5000 into a Fund Earning J2 = 6

You Deposit $5000 into a Fund Earning J₂ = 6