Question

At 6% effective annual interest, approximately how much will be accumulated in ten years if three payments of $100 are deposited every other year for four years, with the first payment occurring at t = 0?

. (A) $180

. (B) $480

. (C) $510

. (D) $540

Answer 1

Ans: $480

Explanation:

Present value = 100 + 100(P/F, 6%, 2) + + 100(P/F, 6%, 4)

                       = 100 + 100(0.8900) + 100(0.7921)

                       = 100 + 89 + 79.21

                       = 268.21

Future value = PV(F/P, i, n)

                     = 268.21(F/P, 6%, 10)

                     = 268.21(1.791)

                     = $480

Thus, option [B] is correct answer.