You are investing AU10771 today in bank account which offers a fixed interest ra

Question

You are investing AU10771 today in bank account which offers a fixed interest rate of 1.06%/quarter. You plan to withdraw AU10,000 from the bank account exactly at the end of five (5) years from today and keep the remaining amount in the same bank account for another five (5) years.
What will be the balance in the account after ten (10) years from today? You are investing AU10771 today in bank account which offers a fixed interest rate of 1.06%/quarter. You plan to withdraw AU10,000 from the bank account exactly at the end of five (5) years from today and keep the remaining amount in the same bank account for another five (5) years.
What will be the balance in the account after ten (10) years from today? You are investing AU10771 today in bank account which offers a fixed interest rate of 1.06%/quarter. You plan to withdraw AU10,000 from the bank account exactly at the end of five (5) years from today and keep the remaining amount in the same bank account for another five (5) years.
What will be the balance in the account after ten (10) years from today?

Explanation / Answer

Balance in account after 5 years but before withdrawal

After sebsequent five years future value is

Interest rate per annum = 1.06% * 4 = 4.24%

Future value FV= PV * (1+rs/m)^mN Present value PV=                                 10,771 Stated rate of interest rs= 4.24% Number of years N= 5 Frequency of compounding per year m= 4 Future value FV= 10771 *(1+ 0.0424/4)^(5*4) FV=                           13,299.70

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