Question

In: Finance

If a sum of $9257 is deposited now, $1374 two years from now, and $1375 per year in years 6 through 10, the amount in year 10 at an interest rate of 10% per year will be closest to

If a sum of $9257 is deposited now, $1374 two years from now, and $1375 per year in years 6 through 10, the amount in year 10 at an interest rate of 10% per year will be closest to:

a. $35350

b. $35346

c. $100368

d. None of the answers

Solutions

Expert Solution

The right option is (a).

 

Explanation:

Amount deposited now = $9257

 

Amount deposited two years from now = $1374

 

Annual deposit from years 6 through 10 = $1375

 

Interest rate = 10% per year

 

Time period = 10 years

 

Calculate the amount in Year 10 -

 

Amount = Amount deposited now(F/P, i, n) + Amount deposited two years from now(F/P, i, n) + Annual deposit from year 6 through 10(F/A, i, n)

 

Amount = $9257(F/P, 10%, 10) + $1374(F/P, 10%, 8) + $1375(F/A, 10%, 5)

 

Amount = [$9257 * 2.5937] + [$1374 * 2.1436] + [$1375 * 6.1051]

 

Amount = $24009.88 + 2945.31 + 8394.51

 

Amount = $35349.7

 

Thus,

 

The amount in year 10 will be closest to $35350.

 

Hence, the correct answer is the option (a) [$35350].


Hence, the correct answer is the option (a) [$35350].

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