A sum of $5,000 is deposited now, $7,000 three years from now, and $2,000 each y

Question

1. A sum of $5,000 is deposited now, $7,000 three years from now, and $2,000 each year from years 4 through 10. Determine the future worth of these deposits at the end of year 10 at an interest rate of 10% per year. A. $49,210 B. $26,000 C. $45,587 D. $56,390.

A sum of $5,000 is deposited now, $7,000 three years from now, and $2,000 each year from years 4 through 10. Determine the future worth of these deposits at the end of year 10 at an interest rate of 10% per year. A. $49,210 B. $26,000 C. $45,587 D. $56,390. A sum of $5,000 is deposited now, $7,000 three years from now, and $2,000 each year from years 4 through 10. Determine the future worth of these deposits at the end of year 10 at an interest rate of 10% per year. $49,210 $26,000 $45,587 $56,390. A. $49,210 B. $26,000 C. $45,587 D. $56,390.

Explanation / Answer

c) $45,587
On applying the concept of compound interest on the various inputs( deposits), we can obtain the required amount.

10% C.I on $5000 for 10 yrs. =a (let)
10% C.I on $7000 for 7 yrs. =b (let)
10% C.I on $2000 for various years.

Thus, amount= a + b + 2000*( 1.1^6 + 1.1^5 +1.1^4 *1.1^3 +1.1^2 + 1.1 + 1)
Where, a = 5000*(1.1)^10
b = 7000* (1.1)^7

On, cmbining the results, we btain the net worth as $45,487.

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