Question

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?

	a.	$291,687
	b.	$277,797
	c.	$263,907
	d.	$238,176
	e.	$250,712

Answer 1

Year	Cash flow	Future value
0	25,000	25000*(1+9%)^12	$        70,317
1	7500	7500*(1+9%)^11	$        19,353
2	7500	7500*(1+9%)^10	$        17,755
3	7500	7500*(1+9%)^19	$        16,289
4	7500	15000*(1+9%)^8	$        14,944
5	7500	7500*(1+9%)^7	$        13,710
6	7500	7500*(1+9%)^6	$        12,578
7	15000	15000*(1+9%)^5	$        23,079
8	15000	15000*(1+9%)^4	$        21,174
9	15000	15000*(1+9%)^3	$        19,425
10	15000	15000*(1+9%)^2	$        17,822
11	15000	15000*(1+9%)	$        16,350
12	15000	15000	$        15,000
			$      277,797
Answer =	$            277,797