You want to quit your job and return to school for an MBA degree 3 years from now, and you plan to save $7,000 per year, beginning immediately. You will make 3 deposits in an account that pays 5.2% interest. Under these assumptions, how much will you have 3 years from today?

Question

Nathan Crawford

Business

11 November, 03:33

You want to quit your job and return to school for an MBA degree 3 years from now, and you plan to save $7,000 per year, beginning immediately. You will make 3 deposits in an account that pays 5.2% interest. Under these assumptions, how much will you have 3 years from today?

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Answers (1)

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Donaldson · Answer 1

The correct answer is $23,260.69.

Explanation:

According to the scenario, the given data are as follows:

Payment (pmt) = $7,000

Time period (n) = 3

Rate of interest (r) = 5.2%

So, we can calculate the future value by using following formula:

FV = Pmt (1 + r) ^n + Pmt (1 + r) ^n-1 + Pmt (1 + r) ^n-2

By putting the value, we get

= $7,000 (1 + 0.052) ^3 + $7,000 (1 + 0.052) ^2+$7,000 (1 + 0.052) ^1

= $23,260.69

hence, The future value after 3 years will be $23,260.69.