In: Economics
You deposit today $3100 dollars in an account that pays 4.8 percent per year. For the next few years you will keep making deposits 7.1 percent larger than the previous one. What will be the balance on the account after 15 deposits. I feel like I am missing the annuity to solve this problem, but I could be wrong.
Today I deposit $3,100. Which earns return annually at 4.8%. Thus in the first year the return is $149. 3100*4.8% 3100+149 = 3249.
Every year I go on depositing and I increase the deposit by 7.1%. Thus 3100*(1.071) = 3320. After the 2nd deposit the balance will be 3249 which is the amount deposited plus the interest, and in that year I deposit 3320. Thus the balance will be previous years interest earned income plus this years deposit. Which is $6569 (3320+3249). The interest on that will 6569(1.048) = $6,884
Deposit | Total balance (Deposit plus previous years return) | Return | |
Initial deposit | 3100 | 3249 | |
3320 | 6569 | 6884 | |
3556 | 10440 | 10941 | |
3808 | 14749 | 15457 | |
4079 | 19536 | 20474 | |
4368 | 24842 | 26035 | |
4678 | 30713 | 32187 | |
5011 | 37198 | 38983 | |
5366 | 44350 | 46478 | |
5747 | 52226 | 54733 | |
6155 | 60888 | 63811 | |
6592 | 70403 | 73782 | |
7060 | 80843 | 84723 | |
7562 | 92285 | 96715 | |
8099 | 104813 | 109844 |
Thus the balance would be $109844 including return.
Not including return it would be $104813