



 
Hi Polly. Break it into pieces. Step 1: What is the value of the investment at the end of the 14 years of contributions? where S is the value in 14 years, R is the payment size (500$), i is the interest per payment period (7.5% / 2 times each year = 0.0375) and n is the number of payments (14 x 2 = 28). Step 2: What value does the RRSP grow to in the 7 years of dormancy?
where A is the value after 7 years, P is the initial value (from step 1), i is the interest rate per compounding period (0.0375 again) and n is the number of compounding periods (7 times 2). Step 3: Complete the problem by finding the quarterly payments needed to deplete the RRIF. A variant of the annuity formula from step 1 will do the job: Where P is the principle (the value A from step 2), R is what you need to find (so you need to rearrange the equation a little), i is the interest rate per period (9% per year in quarters equals 0.0225), n is the number of periods (16 x 4). So solve for R and that's your answer. For more explanation of how some of these equations come about, review my answer from yesterday here: http://mathcentral.uregina.ca/QQ/database/QQ.09.08/h/polly1.html and look up "compound interest" using our Quick Search. Cheers,  


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