Helen can earn 3% interest in her savings account. Her daughter Roberta is 11 years old today. Suppose Helen deposits $4000 today, and one year from today she deposits $1000. Each year she increases her deposit by $500 until she makes her last deposit on Roberta's 18th birthday. How much is on deposit after the 18th birthday, and what is the annual equivalent of her deposits?

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Effective Interest Rate

The term interest rate can be defined as the amount that is charged by the lender as a percentage on the principal amount. Interest rate which is charged annually is known as annual percentage rate.