A Young Executive Deposits $300 at the End of Each

question 19

Multiple Choice

A young executive deposits $300 at the end of each month for 6 years and then increases the deposits. If the account earns an annual rate of 8.3%, compounded monthly, how much (to the nearest dollar) should each new deposit be in order to have a total of $400,000 after 21 years from the time the deposits were increased? Round your answer to the nearest dollar.

• A)$282
• B)$1,861
• C)$1,179
• D)$791
• E)$550

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Definitions:

Initial Deposit

The first amount of money placed into an account or investment.

Interest Rate

The percentage at which interest is paid by a borrower for the use of money that they borrow from a lender.

Monthly Instalments

Regular, typically monthly, payments made over a set period to repay a loan or purchase price.

AASB 9

The Australian Accounting Standards Board standard covering the classification, measurement, and derecognition of financial instruments.