Payments of $500

question 27

Essay

Payments of $500.00 are made at the beginning of each month for four years. The interest rate is 4.5% compounded monthly. If no further deposits are made
a) Calculate the accumulated value twelve years after the first deposit.
b) Calculate the amount deposited.
c) Calculate the interest.

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Definitions:

Nominal Interest Rate

The percentage increase in money that the borrower pays the lender, not adjusting for inflation.

Inflation Rate

The percentage rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling, over a given period of time.

Purchasing Power

the value of currency expressed in terms of the amount of goods or services that one unit of money can buy.

Inflation

The rate at which the general level of prices for goods and services rises, eroding purchasing power.