One year ago JK Mfg deposited 20500 in an investment account

One year ago, JK Mfg. deposited $20,500 in an investment account for the purpose of buying new equipment four years from today. Today, it is adding another $15,000 to this account. The company plans on making a final deposit of $10,000 to the account one year from today. How much will be available when it is ready to buy the equipment, assuming the account pays 3.5 interest?

Solution

Current value of amount deposited one year ago is:

F = 20500(1+0.035)¹ = 21217.5

Now, 15000 is added to 21217.5. So, at the end of first year the amount becomes

F = 21217.5 + 15000(1+0.035)¹ = 37485.11

Now, 10000 is added to 37485.11. So, at the end of second year the amount becomes

F = 37485.11 + 10000(1+0.035)¹ = 49147.09

At the end of Third year the amount becomes

F = 49147.09(1+0.035)¹ = 50867.24

At the end of Fourth year the amount becomes

F = 50867.24(1+0.035)¹ = $52,647.59

We can round up it to $52,648