Calculating the Amount in Kiara's RRSP Account
Question:
What is the total amount in Kiara's RRSP account on May 1, 2016, if he made multiple deposits and the account earns 6.6% p.a. compounded monthly?
Answer:
The amount in the RRSP account on May 1, 2016, is $4038.99.
Explanation:
Kiara opened an RRSP deposit account on December 1, 2008, with a deposit of $2400. He added $2400 on March 1, 2010, and $2400 on September 1, 2012.
To calculate the amount in Kiara's RRSP account on May 1, 2016, we need to consider the deposits made and the compound interest earned. The formula for compound interest is:
A = P(1 + r/n)^(nt)
Where:
A is the amount of money in the account after time t
P is the principal deposit amount
r is the annual interest rate (expressed as a decimal)
n is the number of times interest is compounded per year
t is the number of years
Using the given information, the principal deposit amount P is $2400, the annual interest rate r is 6.6% (or 0.066), the number of times interest is compounded n is 12 (since it is compounded monthly), and the number of years t is 2016 - 2008 = 8.
Substituting these values into the formula, we can calculate the amount in the account:
A = $2400(1 + 0.066/12)^(12*8) = $2400(1.0055)^96 = $2400(1.677616) = $4038.99
Therefore, the amount in Kiara's RRSP account on May 1, 2016, is $4038.99.