QMA Question 2 Week 5 (1 Viewer)

[emi ye]

I don't know how to do these questions where the interest rate changes during a savings account. Can anyone help?

The parents of a 10 yr old girl believe their daughter will be able to study at uni when she is 18. They estimate that if they accumulate a sum of $45,000 over the next 8 years they will be able to cover uni fees. To achieve this goal, they make equal deposits into a bank account at the end of the next 8 yrs. Initially the bank account pays interest of 5% pa coumpounded annually, however it changes to 6% pa compunded annually after 5 yrs. If after 5 yrs the couple reduce their annual deposit to take account of the higher interst rate, what will be the new deposit for the last 3 yrs?

Thanks!

 

[Grizzly]

This question is weird. The couple could be depositing like $7,000 for 5 years, then $1 for the final three payments.

It doesn't say how much the reduce the final 3 payments.
But it, they didn't and continued to make equal deposits for 8 years igot 4608.42c.