You want to quit your job and return to school for an MBA degree 3 years from now, and you plan to save $5,600 per year, beginning immediately. You will make 3 deposits in an account that pays 5.2% interest. Under these assumptions, how much will you have 3 years from today?

Taking into account the concept of compound interest, to each addition of $ 5,600 must be added the previously entered values, and the interest generated by these:

Year 1: $5,600 x 1.052 = $5,891.2

Year 2: ($5,891.2 + $5,600) x 1.052 = $11,491.2 x 1.052 = $12,088.74

Year 3: ($12,088.74 + $5,600) x 1.052 = $17,688.74 x 1.052 = $18,608.55

Thanks to the compound interest of 5.2%, in 3 years I will have a total amount of $18,608.55.

prosolver prosolver · Answer 2 · 2020-04-02T10:19:38+02:00

prosolver prosolver

02-04-2020

Answer:

$17688.74 is the amount in the account 3 years from today.

Explanation:

Given P = $5,600, N = 3 years, r = 5.2% FV = ?

Since there will be equal yearly payments the FV of annuity formula is appropriate to use

FVA = P[(1+r)^n-1/r]

The substitute the relevant values

=5600[(1+0.052)^3-1/0.052}

=$17688.74

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