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18 May, 09:57

You want to open a sushi bar 3 years from now, and you plan to save $7,000 per year, beginning immediately. You will make 3 deposits in an account that pays 5.2% interest. Under these assumptions, how much will you have 3 years from today

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  1. 18 May, 10:08
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    You will have $23,261 in 3 years from today

    Explanation:

    Assuming that Interest is paid at the year end

    Year 1

    First Installment = $7,000

    Interest for the year = $7,000*5.2% = $364

    Carried forward balance = $7,000+$364 = $7,364

    Year 2

    Balance = $7,364

    Second Installment = $7,000

    Balance = $7,364+$7,000 = $14,364

    Interest for the year = $14,364*5.2% = $747

    Carried forward balance = $14,364+$747 = $15,111

    Year 3

    Balance = $15,111

    Second Installment = $7,000

    Balance = $15,111+$7,000 = $22,111

    Interest for the year = $22,111*5.2% = $1,150

    Carried forward balance = $22,111+$1,150 = $23,261
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