Given a 7 percent interest rate, compute the year 8 future value of deposits made in years 1, 2, 3, and 4 of $750, $1,200, $500, and $250.
A) $3,801.62
B) $3,899.17
C) $4,034.20
D) $4,167.29

Question

Quizplus · Accepted Answer

To find the future value of each deposit, we compound each amount to year 8 using the formula FV = PV * (1 + r)^n, where PV is the present value, r is the interest rate, and n is the number of years. For $750 in year 1, FV = 750 * (1.07)^7; for $1,200 in year 2, FV = 1,200 * (1.07)^6; for $500 in year 3, FV = 500 * (1.07)^5; for $250 in year 4, FV = 250 * (1.07)^4. Adding these future values gives the total future value of $4,034.20.

Given a 7 Percent Interest Rate, Compute the Year 8