Suppose you deposit $100 in a bank account at nominal annual rate of interest 6%, convertible quarterly, and six months later deposit $200. How big will your account be two years after your second deposit?

• 225
• 280
• 315
• 320
• 341

References

Hlynka, Myron. "University of Windsor Old Tests 62-392 Theory of Interest". web2.uwindsor.ca. Retrieved November 23, 2023.

Solution: E

We are given [math]i^{(4)}=.06[/math], so [math]1+i=\left(1+\frac{i^{(4)}}{4}\right)^4=1.06136[/math]. The first deposit occurs at time 0 , the second at time 0.5 . We need to calculate the amount accumulated at time 2.5. The first deposit accumulates to [math]100(1+i)^{2.5}=116.054[/math], the second deposit to [math]200(1+i)^2=225.2985[/math]. The sum is 341.35 .

References

Hlynka, Myron. "University of Windsor Old Tests 62-392 Theory of Interest". web2.uwindsor.ca. Retrieved November 23, 2023.