You want to go to grad school 4 years from now, and you can save $5,000 per year, beginning one year from today. you plan to dep
osit the funds in a mutual fund which you expect to return 10% per year. under these conditions, how much will you have just after you make the 4th deposit, 4 years from now?
The value of the final deposit is 5000. The value of the one a year previously is 5000*1.1 = 5500. The one previous to that has a value of 5000*1.1^2 = 6050. The first deposit has a value of 5000*1.1^3 = 6655.
The total value of the 4 deposits is .. 6665 +6050 +5500 +5000 = 23,205
You will have $23,205 just after you make the 4th deposit.
_____ This is the sum of 4 terms of a geometric sequence with common ratio 1.1 and initial value 5000. That can be calculated as .. a0*(r^n -1)/(r -1) .. 5000*(1.1^4 -1)/(1.1 -1) .. = 5000*4.641 .. = 23,205
