Assume you can save $8,500 at the end of Year 2, $9,300 at the end of Year 3, and $7,100 at the end of Year 6. If today is Year 0, what is the future value of your savings 10 years from now if the rate of return is 7.8 percent annually

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Business

Evangeline Zavala

12 January, 14:38

Assume you can save $8,500 at the end of Year 2, $9,300 at the end of Year 3, and $7,100 at the end of Year 6. If today is Year 0, what is the future value of your savings 10 years from now if the rate of return is 7.8 percent annually

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Leslie Wheeler · Answer 1

The future value of your savings 10 years from now = $40,822.55

Explanation:

The future value of the total investment would be the sum of the future value of each of the individual amount invested.

The future value of a lump sum

FV = PV * (1+r) ^n

FV - Future value, r - interest rate, n - number of years

Fist investment: $8,500 * (1.078^8) = 15,501.33

Second investment: 9,300 * 1.078^7 = 15,733.098

Third investment: 7,100 * 1.078^4 = 9,588.118

Value of the total savings = 15501.33 + 15733.098 + 9588.118=40,822.55

The future value of your savings 10 years from now = $40,822.55