Question

Hightown Electronics deposits $75,000 at the end of each 6-month period for the next 3 years, to accumulate enough money to meet debts that mature in 3 years. What is the future value that the company will have on deposit at the end of 3 years if the annual interest rate is 10%?

Answer 1

$510,143.25

Step-by-step explanation:

Calculation to determine the future value that the company will have on deposit at the end of 3 years

First step is to calculate the Present value (PV) using financial calculator

N = ( 3 years x 2 )=6

I/Y = ( 10% / 2 )=5%

PV = ?

PMT = -$75,000

FV = 0

Hence,

PV = $380676.91

Now let calculate Face value (FV) using financial calculator

N = 6

I/Y = 5%

PV = -$380,676.91

PMT = 0

FV = ?

Hence,

FV = $510,143.25

Therefore the future value that the company will have on deposit at the end of 3 years is $510,143.25