Rachel wants to take a trip to England in 3 years, and she has started
a savings account today to pay for the trip.  Today (8/1/02) she made
an initial deposit of $1,000.  Her plan is to add $2,000 to the
account one year from now (8/1/03) and another $3,000 to the account
two years from now (8/1/04).  The account has a nominal interest rate
of 7%, but the interest is compounded quarterly.  How much will Rachel
have in the account 3 years from today (8/1/05)?
     Please note:  The solution is somewhere in between:  $6,500 and $7,000.

Answer:

6,508.18

I don't believe that to be the answer; I have narrowed down the answer
to be between  $6,700 and $6,900.  (I used N = 12 and periodic rate =
7/4 = 1.75%

jax26-ga:

As an academic exercise, the easiest way to 'see' this problem is to
use a spreadsheet (ie. Excel).

Set up 13 columns, each with the starting date of a quarter; ie,
Column A starts with Aug/01/2002, Col B is Nov/01/2002, etc, to Col M
which is Aug/01/05. That's row 1.

In Cell A2, put 1000. In Cell B2, put "=A2*1.0175" to calculate the
value after one quarter... then drag the formula across the remaining
cells in the row so that Cell M2 has "=L2*1.0175" in it. M2 is the
value of the original $1000 investment at the end of 3 complete years.

In Cell E3 (ie. Aug/01/2003), put 2000. F3 is going to be
"=E3*1.0175", and again drag to M3 which will be "=L3*1.0175". That's
the value of the $2000 after two years (Aug/01/2003 to Aug/01/2005).

In Cell I4, which is Aug/01/2004, put 3000; J4, "=I4*1.0175", etc. to
M4 "=L4*1.0175". You guessed it, this is the value of the $3000 after
one full year of interest.

Add up the three values in M2, M3, M4, and you have your total: $6744.78.

Now, you can figure out how to write this as a formula!

Hope this helps, 

aht-ga
Google Answers Researcher

Thank you.  My answer matches the answer you calculated.  

//S