Superannuation Question (1 Viewer)

[sig]

From 2002 Paper

Question 9(b)

A supperannuation fund pays an interest rate of 8.75% per annum which compounds annually. Stephanie decides to invest $5000 in the fund at the beginning of each year, commencing on 1 JANUARY 2003.

What will be the value of Stephanie's supperannuation when she retires on 31 DECEMBER 2023??



Now i'm not so concerned about the calculations rather what is n the number of terms. I say n = 20

but the book's solutions (MANSW) says n = 21

I only seem to count 20. As the first n should start on 1 january 2004 right? Commencing means she starts on 1st of jan 2003 meaning it'll get compounded in 2004 for the first time?


Thanks in advance

 

[Xayma]

I get 21 terms, assuming that they are compounded on the 31st or earlier. If you think in terms of investment if it is invested on the day, of Jan 1, before its compounded it will be compounded along with the rest. Without telling you when its compounded I would assume that it is compounded at 12 Midnight December 31, which is before technically Jan 1st. If she retires at the end of the day it will be 21.