Question

Each year a certain amount of money is deposited in an account which pays an annual interest rate of r so that at the end of each year the balance in the account is multiplied by a growth factor of x=1+r . $1,000 is deposited at the start of the first year, an additional $300 is deposited at the start of the next year, and $500 at the start of the following year. b. Determine (to the nearest cent) the amount in the account at the end of three years if the interest rate is 4%. Type the answer in the box below. $

Answer 1

$1969.34

Explanation:

You want the balance after 3 years in an account earning 4% interest compounded annually when deposits of $1000, $300, and $500 are made at the beginning of three consecutive years.

Future value

The future value of an amount P earning rate r compounded yearly for t years is ...

A = P(1 +r)^t

The final balance will be the sum of the future values of each of the deposits:

A = 1000(1.04^3) +300(1.04^2) +500(1.04^1) = 1969.34

The amount in the account after 3 years is $1969.34.

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