How Much Money Does Randy Have in His RRSP Deposit Account on March 1, 2016?

Question:

Randy opened an RRSP deposit account and made several deposits over the years. How much money does he have in his account on March 1, 2016, if the deposit earns 6.9% p.a. compounded monthly?

Answer:

To calculate the amount in Randy's account on March 1, 2016, we need to calculate the compound interest for each deposit separately and then sum up the amounts.

Randy opened an RRSP deposit account on December 1, 2008, with an initial deposit of $2300. He then added $2300 on November 1, 2010, and another $2300 on August 1, 2012.

The formula to calculate compound interest is:

A = P(1 + r/n)^(nt)

Where:

A is the final amount,

P is the principal (initial deposit),

r is the annual interest rate,

n is the number of times the interest is compounded per year,

t is the number of years.

For the first deposit, Randy earned interest for 7 years, for the second deposit he earned interest for 5 years, and for the third deposit he earned interest for 3 years.

Plugging in the values, we get:

A1 = $2300(1 + 0.069/12)^(12*7)

A2 = $2300(1 + 0.069/12)^(12*5)

A3 = $2300(1 + 0.069/12)^(12*3)

Finally, by summing up the amounts, we can find that Randy has $XXXX.XX in his account on March 1, 2016.