Question

Your employer has agreed to place year- end deposits of $1,000, $2,000 and $3,000 into your retirement account. The $1,000 deposit will be one year from today, the $2,000 deposit two years from today, and the $3,000 deposit three years from today. If your account earns 5% per year, how much money will you have in the account at the end of year three when the last deposit is made?

Answer 1

Answer:

Total money= 1102.5+2100+3000= $6202.5

Explanation:

Giving the following information:

Your employer has agreed to place year-end deposits of $1,000, $2,000 and $3,000 into your retirement account. The $1,000 deposit will be one year from today, the $2,000 deposit two years from today, and the $3,000 deposit three years from today. If your account earns 5% per year.

We need to use the final value formula:

FV=PV*(1+i)^n

PV= present value

i= interest rate

n= number of years

First deposit will generate interest for 2 years:

FV= 1000*(1.05^2)= $1102.5

Second deposit will generate interest for one year

FV= 2000*(1.05^1)=$2100

The third deposit will not generate interest.

Total money= 1102.5+2100+3000= $6202.5