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You want to buy a house within 3 years, and you are currently saving for the down payment. You plan to save $10,000 at the end of the first year, and you anticipate that your annual savings will increase by 5% annually thereafter. Your expected annual return is 9%. How much will you have for a down payment at the end of Year 3? Do not round intermediate calculations. Round your answer to the nearest cent.

Respuesta :

TomShelby

Answer:

It will have 34,351 available for a down payment at the end of Year 3

Explanation:

savings:

first year: 10,000

second year 10,000 + 5% = 10,000 x 1.05 = 10,500

third years   (10,000 + 5%) + 5% = 10,500  x 1.05 = 11,025

return on Invetment

The first saving will capitalize for two years at 9%

[tex]Principal \: (1+ r)^{time} = Amount[/tex]

First year:  10,000.00

time            2.00

rate 0.09

[tex]10000 \: (1+ 0.09)^{2} = Amount[/tex]

Amount 11,881.00

The second savings will capitalize for one yeat at 9%

Second year: 10,500.00

time 1.00

rate 0.09

[tex]10500 \: (1+ 0.09)^{1} = Amount[/tex]

Amount 11,445.00

Total amount:

11,881 + 11,445 + 11,025 = 34,351

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