How would you do this problem on a financial calculator? 16. You are interested

Question

How would you do this problem on a financial calculator?

16. You are interested in saving money for your first house. Your plan is to make regular deposits intoa brokeage account that ern 14 percent. Your first deposit of S5,000 will be made today. You also plan to make four additional deposits at the beginning of each of the next four years Your plan is to increase your deposits by 10 percent a year. (That is, you plan to deposit S5,500 at t- 1, and S6,050 at t-2, etc.) How much money will be in your account after the last deposit is made? a. Cannot be solved because not enough information is provided b. $23,306 c. $37,678 d. $39,363 e. $44,874

Explanation / Answer

First we compute the net rate as (1+r)/ (1+g) -1

= 1.14/1.1 -1

=3.6364%

Using I/Y as 3.6364 , N= 5, PMT = 5000

PV =- 22488.34

Using I/Y as the discount rate 14, N=5, PV as above,

FV= $43,299.38

Closest answer is e: $ 44874

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