I\'m working on a CSE project and need a little help with an interest rate probl

Question

I'm working on a CSE project and need a little help with an interest rate problem.

A. XDT (a company) is committed to their community. To this end, you have been asked to setup a separate account to set aside funds that will be given to Children's Hospital at the end of each year. Each month your company will make a deposit to this account in the amount of 1/12 of the annual donation amount. This year's annual donation amount is 5% of revenues based on last years revenue calculation from Part 1 - D ( $25,925). This savings account pays 8% annual interest, compounded monthly. Determine the vale of the funds available at the end of this year.

Explanation / Answer

data is not provided so i am doing in variables .just plug in your data and you will get the answer.

let last years revenue=R

then donation=0.05*R

you are depositing (1/12)*0.05*R every month.

let us denote P=(1/12)*0.05*R

then after end of first month ,fund available=P*(1+(0.08/12))=1.0067*P

then P is added .

so net fund at the beginning of the month=2.0067*P

at the end of second month,with interest added,funds=2.0067*P*(1+(0.08/12))=2.02*P

with P added at the beginning of third month,fund available=3.02*P

so calculating in this manner,you will get final fund available at the end of the year=12.535*P

so if amount depoisted at each month is P,then final fund avaialble will be 12.535*P.

Related Questions

Navigate

• Browse (All)
• Browse I
• Subjects