Question

You just deposited $6,500 in a bank account that pays a 4.0% nominal interest rate, compounded quarterly. If you also add another $5,000 to the account one year (4 quarters) from now and another $7,500 to the account two years (8 quarters) from now, how much will be in the account three years (12 quarters) from now?

Answer 1

Answer:

The correct answer is $20,543.17.

Explanation:

According to given scenario, the given data are as follows:

1st Payment (Pmt) = $6,500 for 12 Quarters

Interest rate = 4%

2nd payment = $5,000 for 8 Quarters

3rd payment = $7,500 for 4 Quarters

So, future value can be calculated as follows:

FV =  1st PV (1 + r )^n + 2nd PV (1 + r )^n + 3rd PV (1 + r )^n

FV =  $6,500 × ( 1 + 4%/4)^12 + $5,000 × (1 + 4%/4)^8 + $7,500 × (1 + 4%/4)^4

=  $6500 × (1.01)^12 + $5,000 × (1.01)^8 + $7,500 × (1.01)^4

=  $7,324.36 + $5,414.28 + $7,804.53

= $20,543.17

Hence, the correct answer is $20,543.17.