After graduation, you plan to work for Donald’s Fashion Co. for 7 years and then

Question

After graduation, you plan to work for Donald’s Fashion Co. for 7 years and then start your own business.

You expect to save and deposit $ 10,000 a year for the first 3 years (t = 1 through t = 3) and $14,000 annually for the next 4 years (t = 4 through t = 7).

The first deposit will be made a year from today. In addition, your grandfather just gave you a $40,000 graduation gift which you will deposit immediately (t = 0).

If the account earns 8% compounded annually, how much will you have when you start your business 7 years from now?

Explanation / Answer

Answer: When we start our business 7 years from now we will have $ 1,75,805.45.

Year Amount($) Rate(%) Future Value [ PV (1 + r)t] ($) 0 40000 8 68,552.97 1 10000 8 15,868.74 2 10000 8 14,693.28 3 10000 8 13,604.89 4 14000 8 17635.97 5 14000 8 16,329.60 6 14000 8 15,120.00 7 14000 8 14,000.00 Total 1,26,000 1,75,805.45

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.