Question

You want to buy a house within 3 years, and you are currently saving for the down payment. you plan to save $5,000 at the end of the first year, and you anticipate that your annual savings will increase by 10% annually thereafter. your expected annual return is 7%. how much will you have for a down payment at the end of year 3?

Answer 1

Answer: Just get the FV of each year's cash flow.
At T1 - 5,000, N 2, R 7%, Compute FV at T3 - 5,724.50
At T2 - 5,500, N 1, R 7%, Compute FV at T3 - 5,885.00
At T3 - 6,050, N 0, FV at T3 - 6,050

Total at T3 - 17,659.50