Question

please solve using formula, and show me the formula used for good rate, thanks

An investor deposits $15,000 in a mutual fund account starting in year 1. In year 2, the investor continues to make annual deposits, but decides to reduce the amount deposited by 10 percent each year. The ROR on the mutual fund is = 10%. How much will the investor have in the mutual fund by year 10? Your solution will be closest to? a. $120,000 c. $80,000 b. $170,000 d. $210,000

Answer 1

ANSWER:

YEAR	1	2	3	4	5	6	7	8	9	10
DEPOSITS	15000	13500	12150	10935	9841.5	8857.35	7971.615	7174.4535	6457.00815	5811.307335

fw = deposit in year 1(f/p,i,n) + deposit in year 2(f/p,i,n) + deposit in year 3(f/p,i,n) + deposit in year 4(f/p,i,n) + deposit in year 5(f/p,i,n) + deposit in year 6(f/p,i,n) + deposit in year 7(f/p,i,n) + deposit in year 8(f/p,i,n) + deposit in year 9(f/p,i,n) + deposit in year 10(f/p,i,n)

fw = 15,000(f/p,10%,9) + 13,500(f/p,10%,8) + 12,150(f/p,10%,7) + 10,935(f/p,10%,6) + 9,841.5(f/p,10%,5) + 8,857.35(f/p,10%,4) + 7,971.61(f/p,10%,3) + 7,174.45(f/p,10%,2) + 6,457(f/p,10%,1) + 5,811(f/p,10%,0)

fw = 15,000 * 2.358 + 13,500 * 2.144 + 12,150 * 1.949 + 10,935 * 1.772 + 9,841.5 * 1.611 + 8,857.35 * 1.464 + 7,971.61 * 1.331 + 7,174.45 * 1.21 + 6,457 * 1.1 + 5,811 * 1

fw = 35,369 + 28,938 + 23,677 + 19,372 + 15,850 + 12,968 + 10,610 + 8,681 + 7,103 + 5,811

fw = 168,379.80

so the correct answer is option b that is $170,000