After graduation, you plan to work for Dynamo Corporation for 12 years and then start your own business. You expect to save and deposit $7,500 a year for the first 6 years (t = 1 through t = 6) and $15,000 annually for the following 6 years (t = 7 through t = 12). The first deposit will be made a year from today. In addition, your grandfather just gave you a $25,000 graduation gift which you will deposit immediately (t = 0). If the account earns 9% compounded annually, how much will you have when you start your business 12 years from now?

Question

Business

Colin Mckenzie

25 November, 00:27

After graduation, you plan to work for Dynamo Corporation for 12 years and then start your own business. You expect to save and deposit $7,500 a year for the first 6 years (t = 1 through t = 6) and $15,000 annually for the following 6 years (t = 7 through t = 12). The first deposit will be made a year from today. In addition, your grandfather just gave you a $25,000 graduation gift which you will deposit immediately (t = 0). If the account earns 9% compounded annually, how much will you have when you start your business 12 years from now?

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Answers (1)

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Liana Hebert · Answer 1

Answer:25,000 in 12 years = 25,000 * (1.09) ^12 = $70,316

Value of $7,500 deposits in 6 years

Use financial calculator and input these values

N=6

PV=0

PMT=7,500

I=9

Compute FV = 56,425, after this

PV = 56,425

PMT = 15,000

I=9

N=6

Compute FV=$ 207,480

We will have (207,480 + 70,316) = $277,796 in 12 years to start our business.