You plan to make 40-quarterly deposits into a fund in order to have $10,000 at the end of 10 years.Consider the following 3 cases:
a. Deposit $R_I starting today;earn j₄ = x%
b. Deposit $R_II starting 3-months from today;earn j₄ = x%
c. Deposit $R_III starting 3-months from today;earn j₁₂ = x%
Which of the following is true?

Question

Quizplus · Accepted Answer

Deposits starting today (case a) will accumulate interest for a longer period compared to deposits starting 3 months from today (case b), thus requiring a smaller deposit amount for the same future value. Between case b and case c, the only difference is the interest rate (14% vs. 12%). A higher interest rate (case b) will accumulate more over time, requiring a smaller deposit amount compared to a lower interest rate (case c) for the same future value.

You Plan to Make 40-Quarterly Deposits into a Fund in Order