Question

Ryan expects to deposit $1,000 now, $3,000 four years from now, and $1,500 six years from now in an account that is earning 12% per year compounded semiannually through a company-sponsored saving plan. What amount can he withdraw ten years from now

Answer 1

$11,634.50

Step-by-step explanation:

The future value formula can be applied to each of the deposits:

FV = P(1 +r/n)^(nt)

For 1000 now, interest accumulates for 10 years.

FV = 1000(1 +.12/2)^(2·10) = 3207.14

For 3000 in 4 years, interest accumulates for 6 years.

FV = 3000(1 +.12/2)^(2·6) = 6036.59

For 1500 in 6 years, interest accumulates for 4 years.

FV = 1500(1 +.12/2)^(2·4) ≈ 2390.77

Then the value of the account in 10 years will be ...

$3207.14 +6036.59 +2390.77 = $11,634.50