Question

given an interest rate of 10 percent, compute the year 7 future value if deposits of $2800 and $3800 are made in years 2 and 3 respectively and a withdrawal of $925 is made is year

5

Answer 1

Year 7 future value is $ 8,953.76

Working:

Calculation of year 7 value of cash flows:
Year	Beginning cash flow	Interest	Addition in cash flow	Ending cash flow
	a	b=a*10%	c	d=a+b+c
1	0	0	0	0
2	0	0	$ 2,800.00	$ 2,800.00
3	$ 2,800.00	$ 280.00	$ 3,800.00	$ 6,880.00
4	$ 6,880.00	$ 688.00	0	$ 7,568.00
5	$ 7,568.00	$ 756.80	$   -925.00	$ 7,399.80
6	$ 7,399.80	$ 739.98	0	$ 8,139.78
7	$ 8,139.78	$ 813.98	0	$ 8,953.76