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?

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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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