Question 34 2 points d You are saving money for a down payme

Question 34 (2 points) d You are saving money for a down payment on a new house. You intend to place $7,500 at the end of each year for three years into an account earning 5% per year. At the end of the fourth year, you will place $10,000 into this account. How much money will be in the account at the end of the fourth year? $26,873.08 $34,825.94 $37,918.00 $39,000.00

Solution

To get the future value at the end of the fourth year, we need to compute the Future value of all the three cash flows of $7,500 with an interest rate of 5%.

Hence FV = 7,500 * (1+0.05)³+7,500 * (1+0.05)²+7,500 * (1+0.05)^{1 +}  $10,000 = $24,825.94 + $10,000 = $34,825.94.

At the end of four years, the amount of money in the account would be $34,825.94.