You want to buy a house within 3 years and you are currently

You want to buy a house within 3 years, and you are currently saving for the down payment. You plan to save $3,000 at the end of the first year, and you anticipate that your annual savings will increase by 15% annually thereafter. Your expected annual return is 12%. How much will you have for a down payment at the end of Year 3? Round your answer to two decimal places.

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Solution

We use the formula:
A=P(1+r/100)^n
where
A=future value
P=present value
r=rate of interest
n=time period.

Hence

A=$3000(1.12)^2+3450(1.12)+3967.50

=$11594.70