A student deposits P1,500 now followed by P3,000 annually for the next 2 years at a 10% effective annual rate. If they withdraw P5,000 three years after their final deposit, what balance remains in the account one year post-withdrawal ?
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Answer: A. P1,549.64
Explanation
Compound interest formulas accumulate the initial deposit and subsequent annual annuity payments. Subtracting the withdrawal after three years reduces the accumulated account principal. Compounding the remaining balance for one post-withdrawal year yields P1,549.64. Annuity equations calculate the future worth of a series of uniform regular deposits. Effective annual interest rates compound balances at the end of every active year. Account balances reflect net cash flows adjusted for accumulated interest earnings.
Personal financial planning utilizes future worth equations to model savings growth. Bank auditors verify account balance calculations involving periodic deposits and withdrawals. Investment accounts accrue interest continuously based on prevailing effective rates. Figures such as P1,459.64 result from compounding for incorrect time intervals. Other mismatched balances stem from arithmetic errors in annuity factor evaluations. Omitting the final one-year post-withdrawal compounding period causes calculation errors.
- Subject
- Engineering
- Category
- Civil Engineering
- Topic
- —
- Difficulty
- medium
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