Answer to Question #257597 in Financial Math for zhidan

Question

On 15 November in each of the years 1964 to 1979 inclusive an investor deposited 500$ in a special bank savings account. On 15 November 1983 the investor withdrew his savings. Given that over the period of 15 Nov 1964- 15 Nov 1965 the bank used an annual interest rate of 7% and thereafter an interest rate of 6% for its special savings accounts, find the sum withdrawn by the investor.

Answer 1

End principal(15 Nov 1964- 15 Nov 1965);

=P(1+r$\%$ )ⁿ

⁼$500(1+0.07)^{(1965-1964)}=\$535$

Starting principle at 15th November 1965=$\$535$

Using excel to calculate interest and end balance for the duration starting from 15th November 1965-15th November 1979;(That has an annual addition of $\$500$ ).

Using excel to calculate interest and end balance for the duration starting from 15th November 1979-15th November 1983;(That has no an annual addition of $\$500$ ).So we take starting principal is $\$11,717.12$

Formulas used;

• At column A, start principle is the previous year end principle.
• At column B, start balance is the previous year end balance.
• At column C, interest is calculated using the formula=P(1+$0.06 \%$ )ⁿ-P
• At column D, end balance=start balance+500(Annually deposited)+interest