Question

Suppose you deposit $2,500 at the end of year 1, nothing at the end of year 2, $750 at the end of year 3, and $1,300 at the end of year 4. Assuming that these amounts will be compounded at an annual rate of 9 percent, how much will you have on deposit at the end of five years?

Answer 1

Answer:

$5837 approx

Explanation:

Amount = $Principal(1\ +\ r)^{n}$

Amount deposited at the end of year 1 would yield = $2500 $(1\ +\ .09)^{4}$ = $2500 × 1.41158 = $3528.95

Amount deposited at the end of year year 3 would yield = $750 $(1\ +\ .09)^{2}$ = $891.075

Amount deposited at the end of year 4 would yield = $1300 $(1\ +\ .09)^{1}$ = $1417

Total deposit at the end of year 5 = $3528.95 + $891.075 + $1417 = $5837 approx.