Question

Suppose that you make a series of annual deposits into a bank account that pays 8% interest. The initial deposit at the end of the first year is $1,200. The deposit amounts decline by $200 in each of the next four years. How much would you have immediately after the fifth deposit?

Answer 1

Amount at end of first year = 1200

This amount includes the interest received in the first year. Therefore, amount deposited in the first year is 1200/1.08 = 1111.1111

Year	Amount at the beginning of year(A)	Amount deposited(B)	Total amount (C)               (A+ B)	Interest amount(D) (C)*0.08	Amount at the end of year (C+D)
1	0	1111.111111	1111.111111	88.88888889	1200
2	1200	911.1111111	2111.111111	168.8888889	2280
3	2280	711.1111111	2991.111111	239.2888889	3230.4
4	3230.4	511.1111111	3741.511111	299.3208889	4040.832
5	4040.832	311.1111111	4351.943111	348.1554489	4700.09856

Amount immediately after the fifth deposit is 4351.94311