SOLUTION: Word Problem: Mary deposits $4800 into an account at the end of each quarter. If the account earns 3.7 percent per year compounded monthly, what would the balance be after 6 year

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Question 1123491: Word Problem: Mary deposits $4800 into an account at the end of each quarter. If the account earns 3.7 percent per year compounded monthly, what would the balance be after 6 years? (one year=four quarters).
My Question: How is this broken down so I can see how the question was answered? I'm stumped with her putting money in at the end of the first quarter, so she would not have earned any money until after the end of the first quarter, right?
Found 2 solutions by Alan3354, ikleyn:
Answer by Alan3354(69443)   (Show Source): You can put this solution on YOUR website!
You don't need to say "word problem."
Answer by ikleyn(52862)   (Show Source): You can put this solution on YOUR website!
.
Compounding monthly at the 3.7% API (Annual Percent Yield) works with the factor 


    


which is applied monthly (each month 12 times per year).


In given problem, it is EQUIVALENT compounding quarterly with the factor of 


     =  = 1.009279


which is applied quarterly (four times per year).


At this approach, the compounding period (the end of each quarter) will coincide with the depositing period.


Does this HINT help you to complete the solution on your own ?

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To see other similar (but not identical !) problems, see the lessons
    - Ordinary Annuity saving plans and geometric progressions
    - Solved problems on Ordinary Annuity saving plans
in this site.


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