One year ago, the Jenkins Family Fun Center deposited $4,200 in an investment ac
ID: 2799092 • Letter: O
Question
One year ago, the Jenkins Family Fun Center deposited $4,200 in an investment account for the purpose of buying new equipment four years from today. Today, they are adding another $6,000 to this account. They plan on making a final deposit of $8,200 to the account next year. How much will be available when they are ready to buy the equipment, assuming they earn a 5 percent rate of return?
One year ago, the Jenkins Family Fun Center deposited $4,200 in an investment account for the purpose of buying new equipment four years from today. Today, they are adding another $6,000 to this account. They plan on making a final deposit of $8,200 to the account next year. How much will be available when they are ready to buy the equipment, assuming they earn a 5 percent rate of return?
Explanation / Answer
One year ago payment = 4,200
Future value of one year payment = 4,200 * (1.05)4
Future value of one year payment = 5,105.13
Today payment = 6,000
Future value of today payment = 6,000 * (1.05)3
Future value of today payment = 6,945.75
One year hence payment = 8,200
Future value of one year hence payment = 8,200 * (1.05)2
Future value of one year hence payment = 9,040.50
Total Future value = 5,105.13 + 6,945.75 + 9,040.50
Total Future value = 21,091.38
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