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?

Question

Business

Brown Sugar

28 January, 12:27

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?

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Answers (1)

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Anya · Answer 1

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