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3 May, 20:26

Harry Morgan plans to make 30 quarterly deposits of $200 into a savings account. The first deposit will be made immediately. The savings account pays interest at an annual rate of 8%, compounded quarterly. How much will Harry have accumulated in the savings account at the end of the seven and a half-year period? (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor (s) from the tables provided.)

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  1. 3 May, 21:21
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    Amount in savings account after 7 and a half years is $8,113.62

    Explanation:

    Given:

    Quarterly payments made in savings account (pmt) = $200

    Annual interest rate = 8%

    Quarter interest rate (rate) = 8:4 = 2%

    Compounding period (nper) = 7 and a half years or 7.5*4 = 30 quarterly payments

    This is an annuity as uniform amount of $200 is deposited every quarter.

    Savings at the end of seven and a half years mean future value of annuity.

    Future value of annuity can be computed using spreadsheet function = FV (rate, nper, pmt, PV)

    Savings account will have $8113.62 at the end of seven and a half years.
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