1 year ago the Jenkins Center opened an investment account a

1 year ago, the Jenkins Center opened an investment account and deposited $5,000. Today, it is depositing an additional $6,000 and will make a final deposit of $7,500 1 year from now. How much will the firm have saved 3 years from now if it earns an average annual return of 6.5 percent?

Multiple Choice

$22,186.72

$19,159.67

$23,628.86

$22,430.84

$20,832.60

Solution

Amount deposited last year = $5,000
Amount deposited today = $6,000
Amount deposited next year = $7,500

Rate of Return = 6.5%

Balance after 3 years = $5,000*1.065^4 + $6,000*1.065^3 + $7,500*1.065^2
Balance after 3 years = $22,186.72

So, amount saved after 3 years is $22,186.72