May 2018 Q5 a.
Kofy Addo invested GH¢4,000 into his bank account at the beginning of every year for four years. The bank paid interest at 8% compounded annually for the first four years. Thereafter, the interest rate changed to 8.35% but Kofy Addo did not make any more deposits. At the end of the sixth year he withdrew GH¢5000.
Required:
i) Calculate the size of the investment at the end of the sixth year, before the withdrawal. (5 marks)
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ii) Calculate the size of the investment after the withdrawal in the sixth year. (2 marks)
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Size of investment after withdrawal = 22,853.01 – 5,000
= GH¢17,853.01
iii) Calculate the balance in the account after the eighth year. (3 marks)
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After the 8th year, n=2
Balance in the account after the 8th year
= GH¢20,958.94