When you were born, your parents set up a bank account in your name with an initial

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When you were born, your parents set up a bank account in your name with an initial investment of $5,000. You are turning 21 in a few days and will have access to all your funds. The account was earning 7.3 percent for the first seven years, but then the rates went down to 5.5 percent for six years. Your account then earned 8.2 percent three years in a row. Unfortunately, the next two years you earned only 4.6 percent. Finally, as the economy recovered, the return jumped to 7.6 percent for the last three years.

a. How much money was in your account before the rates went down drastically at the end of Year 16?

b. How much money is in your account now, at the end of Year 21?

c. What would be the balance now if your parents had made another deposit of $1,200 at the end of Year 7?

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Fundamentals Of Corporate Finance

ISBN: 9781119795438

5th Edition

Authors: Robert Parrino, David S. Kidwell, Thomas W. Bates

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