Question

You just deposited $13,000 in a bank account that pays a 4.0% nominal interest rate, compounded quarterly. If you also add another $5,000 to the account one year (4 quarters) from now and another $7,500 to the account two years (8 quarters) from now, how much will be in the account three years (12 quarters) from now?

Select the correct answer.

a. 27,900.74

b. 27,884.14

c. 27,867.54

d. 27,917.34

e. 27,850.94

Answer 1

FV= PV*(1+r)^n
Where,
FV= Future Value
PV = Present Value
r = Interest rate
n= periods in number
Quarterly rate = 4%/4 =1%
Quarter	Cash Flow	Calculations	Future value
0	$ 13,000	=$13000*(1+0.01)^12	$           14,649
4	$    5,000	=5000*(1+0.01)^8	$             5,414
8	7500	=$7500*(1+0.01)^4	7804.530075
Future value			$     27,867.54
Correct Option :c. 27,867.54