Question

You open a bank account, making a deposit of $500 now and deposits of $1,000 every other year. What is the total balance at the end of 10 years from now if your deposits earn 4% interest compounded annually?(This means there is an initial deposit of $500 and then $1,000 deposits skipping one year. That is, at the end of the first year, there is no deposit; at the end of the second year, there is a $1,000 deposit; at the end of the third year there is no deposit; and so on.)

Answer 1

$6,625.347

Step-by-step explanation:

The computation of the total balance at the end of 10 years is shown below:

We know that

Future value = Deposits × (1 + interest rate)^number of years

So, the future value would be

= $500 × (1 +0.04)^10 + $1,000 × (1 +0.04)^8 + $1,000 × (1 +0.04)^6 + $1,000 × (1 +0.04)^4 + $1,000 × (1 +0.04)^2 + $1,000

= $740 + $1,368.569 + $1,265.319 + $1,169.859 + $1,081.60 + $1,000

= $6,625.347