Problem 1: Determine the future worth of ten (10) payments starting with an initial $500 payment...
Problem 1: Determine the future worth of ten (10) payments starting with an initial $500 payment and increasing by a constant amount of $250 each year thereafter in an account that yields a nominal annual interest rate of 3.0%.
Draw the Cash Flow Diagram:
Write the Economic Formula:
Solution:
Homework Answers
Here,
Interest Rate = 3%
Starting Payment = $500
Growth in payments each year = $250
| Payment | Value | ||
| 18-03-2020 | Year 0 | 500 | |
| 18-03-2021 | Year 1 | 750 | 1265 |
| 18-03-2022 | Year 2 | 1000 | 2303.0 |
| 18-03-2023 | Year 3 | 1250 | 3622.0 |
| 18-03-2024 | Year 4 | 1500 | 5230.7 |
| 18-03-2025 | Year 5 | 1750 | 7137.6 |
| 18-03-2026 | Year 6 | 2000 | 9351.7 |
| 18-03-2027 | Year 7 | 2250 | 11882.3 |
| 18-03-2028 | Year 8 | 2500 | 14738.8 |
| 18-03-2029 | Year 9 | 2750 | 17930.9 |
PAyment After 1 year = $500*1.03 + $750 = $1265, 3% being the interest rateNow, Initial Payment = $500
Payment After 2 year = 1265*1.03+ $1000 = $2303.0
......
Payment After 10 payments = $17930.9
Thus the Future Worth = $17930.9
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Problem 1: Determine the future worth of ten (10)
payments starting with an initial $500 payment...
Problem 1: Determine the future worth of ten (10) payments starting with an initial $500 payment...
Problem 1: Determine the future worth of ten (10) payments starting with an initial $500 payment and increasing by a constant amount of $250 each year thereafter in an account that yields a nominal annual interest rate of 3.0%. Draw the Cash Flow Diagram: Write the Economic Formula:
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