Question

Dave makes payments of 100 at the end of year 1, 300 at the end of year 3, 500 at the end of year 5 and so on until he makes his final deposits of 2,100 at the end of year 21. Find the present value of Dave's deposits using an annual effective rate of 4%.

Answer 1

Answer:

The present value for each year is calculated at 4% interest. In this question the present value be the sum of the cash deposits plus the interest for each year.

Present Value

= Sum of cash deposits for each year + Interest for each year

= 23100 + 9240

= 32340

Explanation:

To calculate the sum of the cash deposits, add the deposit for each year.

(Year 1 to Year 21 = 23100)

To calculate the interest for each year, take the cash deposit for the year and multiply it by 4%. (Year 1 to Year 21 = 9240)

Refer to the attached spreadsheet to assist with the calculations and the answer given above.

Download xlsx