Question

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.

Answer #1

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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