Question

$7000 is invested for a period of 10 years at 15% interest. Payments of $300 are added at year 1, $400 at year 2, $500 at year 3, etc. increasing until year 10. You also make lump sum payments of $2500 at year 3 and year 7. What is the future worth?

Answer 1

FOR 1^st year,

begining investment = $7000

Payment in 1^st year =$300

Interest in 1^st year = $( 7000+300 *15/100)

= $1095

Worth after one year = (invested amt + interest of 1^st year)

= $(7300+1095) = $8395

In 2^nd year,

Interest is = $(8395+400*15/100) = $1319.25

Worth is = $(1319.25+8795) = $10114.25

In 3^rd year

Lunp sum amt paid = $2500

Total = $(2500+500+10114.25) = $ 13114.25

Interest = $(13114.25*15/100) = $1967.138

Worth after 3^rd year = $(13114.25+1967.138) = $ 15081.388

Worth after 4^th year = $(15081.388+600*15/100) = $18033.596

Worth after 5^th year = $(18033.596+700*15/100) = $21543.635

Worth after 6^th year = $(21543.635+800*15/100) = $25695.18

Worth after 7^th year = $(25695.18+900+2500*15/100) = $33459.457

Worth after 8^th year = $(33459.457+1000*15/100) = $39478.376

Worth after 9^th year = $(39478.376+1100*15/100) = $46665.132

Worth after 10^th year = $(46665.132+1200*15/100) = $47865.132