Question
Suppose that you have a saving account at a bank that pays 6% per year. Suppose that you deposit an amount of $475 in the
Suppose that you have a saving account at a bank that pays 6% per year. Suppose that you deposit an amount of $475 in the bank today followed by the following additional deposits: $525 in year one, $550 in year two, and $575 in year three. How many dollars would you have in your savig account at the end of year four (before you make any deposit at time point 4)? Start by writing down what you are calculating. Example PV or FV, and what time point, FV1 or FV2 etc. The same applies to all solutions.
Suppose that you a have a saving account at a bank that pays 6% per year. Suppose that you deposit an amount of $475 in the bank today followed by the following additional deposits: $525 in year one, $550 in year two, you miss depositing any amount in year three, then you deposit $575 in year four. How many dollars would you have in your saving account at the end of year four (before you make any deposit at time point 4)?
Review the above two problems. Can you explain the difference in the answers? (Calculate the difference and explain why that difference makes perfect sense).
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