Question 4.6: A person has $4000 in a savings account at the beginning of ......

Table 4-1 shows the transactions carried out during the calendar year; the second column gives the effective dates according to rules 1 and 2 above. To find the balance in the account at the end of the calendar year, we calculate the effective interest rate, 6%/4 = 1.5% per quarter. Then, lumping the amounts at the effective dates and applying (2.1), we obtain

F/P = (1 + i)”  (2.1)

F = ($4000 – $175)(F/P, 1.5%, 4) + ($1200 – $1800)(F/P, 1.5%, 3)

+($180 – $800)(F/P, 1.5%, 2) + ($1600 – $1100)(F/P, 1.5%, 1) + $2300

= $3825(1.0614) – $600(1.0457) – $620(1.0302) + $500(1.0150) + $2300

= $5601.21