Question

You just deposited \$25,000 in a bank account that pays a 12.0% nominal interest rate, compounded...

You just deposited \$25,000 in a bank account that pays a 12.0% nominal interest rate, compounded semi-annually. If you also add another \$3,000 to the account each year over the next five years, how much will be in the account five years from now?

Show all your work.

This is simply the calculation of Future Value of the payments 25000 today for 5 years and 3000 annualy at year end with compounding Semi annually So period of 5 year goes to 10 periods.

Calculation as under:

 Year Time of Investment Cash flows Invested Time period Compounding Factor @ 6% Future Value Today 0 25000 10 1.7908 44770.0000 1 1 0 9 1.6895 0.0000 2 3000 8 1.5938 4781.5442 2 3 0 7 1.5036 0.0000 4 3000 6 1.4185 4255.5573 3 5 0 5 1.3382 0.0000 6 3000 4 1.2625 3787.4309 4 7 0 3 1.1910 0.0000 8 3000 2 1.1236 3370.8000 5 9 0 1 1.0600 0.0000 10 3000 0 1.0000 3000.0000 Amount 63965.3324

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