Problem

Connor has made deposits of $85.00 into his savings account at the end of every three months for 14 years. If interest is 11% per annum compounded monthly and he leaves the accumulated balance for another 4 years, what would be the balance in his account then?
The balance in his account would be $.
(Round the final answer to the nearest cent as needed. Round all intermediate values to six decimal places as needed.)

Answer

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Answer

So, the balance in his account would be $10,315.68.

Steps

Step 1 :Let's denote the total amount in the account after 14 years as A1 and the total amount in the account after another 4 years as A2.

Step 2 :Since Connor deposits money every three months, there are 4 deposits in a year. So, in 14 years, there are 144=56 deposits.

Step 3 :The interest is compounded monthly, so the interest rate per period is 11%12=0.00916667.

Step 4 :We can use the formula for the future value of an ordinary annuity to calculate A1: A1=P[(1+r)nt1]/r, where P is the amount of each deposit, r is the interest rate per period, and nt is the total number of periods.

Step 5 :Substituting the given values, we get: A1=85[(1+0.00916667)561]/0.00916667=$7,238.96.

Step 6 :Next, we need to calculate A2. The amount A1 will be compounded for another 4 years at the monthly interest rate of 0.00916667.

Step 7 :We can use the formula for compound interest to calculate A2: A2=A1(1+r)nt, where A1 is the initial amount, r is the interest rate per period, and nt is the total number of periods.

Step 8 :Substituting the given values, we get: A2=7238.96(1+0.00916667)(412)=$10,315.68.

Step 9 :So, the balance in his account would be $10,315.68.

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