Answer:
The correct answer is:
$17,437.28
Explanation:
First of all, let us lay out the particulars that will aid us in our calculations:
Amount saved in year 1 = $2000
Number of years saved in total = 6 years
annual rate of savings increase = 10% increase on the amount for that year to the next year
Annual return on investment = 13%.
Next, let us calculate the 10% increase in savings from years 2 to 6.
Year 1 investment = $ 2000
Year 2 investment = Year 1 saving + 10% of year one saving
hence, investment 2 saving = 2000 + (10/100 × 2000) = 2000 + (0.1 × 2000)
Year 2 investment = 2000 +200 = $2,200.
Year 3 investment = year 2 saving + (0.1 × year 2 saving) = 2200 + (0.1 × 2200)
year 3 investment = 2200 + 220 = $2,420
Year 4 investment = 2420 + (0.1 × 2420) = 2420 + 242 = $2,662
Year 5 investment = 2662 + (0.1 × 2662) = 2662 + 266.2 = $2928.2
Year 6 investment = 2928.2 + (0.1 × 2928.2) = 2928.2 + 292.82 = $3,221.02
Next, let us create a table to show the total amount for each year.
Note, to determine the 13% annual investment return on each year:
13% = 13/100 = 0.13. So, we will multiply the investment for each year with 0.13 to get the annual investment. It is shown hence:
Year Investment (I) ($) Annual return (AR) ($) Total amount (I + AR) ($)
1 2000 260 2260
2 2200 286 2486
3 2420 314.6 2734.6
4 2662 346.06 3008.06
5 2928.2 380.67 3308.87
6 3221.02 418.73 3639.75
Total 17,437.28
Therefore, at the end of 6 years mark would have $17,437.28 (approx. $17,437)
