After graduation,you plan to work for Dynamo Corporation for 12 years and then start your own business.You expect to save and deposit $7,500 a year for the first 6 years (t = 1 through t = 6)and $15,000 annually for the following 6 years (t = 7 through t = 12).The first deposit will be made a year from today.In addition,your grandfather just gave you a $32,500 graduation gift which you will deposit immediately (t = 0).If the account earns 9% compounded annually,how much will you have when you start your business 12 years from now?
A) $269,003
B) $292,914
C) $298,892
D) $286,936
E) $310,848

Question

Quizplus · Accepted Answer

There are 3 cash flow streams: the gift and the two annuities.The gift will grow for 12 years.Then there is a 6-year annuity whose FV at the end of Year 6 will compound for an additional 6 years.Finally,there is a second 6-year annuity.The sum of the compounded values of those three sets of cash flows is the final amount. 11ea856c_8beb_cda6_9aec_1df187b9ba5f_TB1222_00

After Graduation,you Plan to Work for Dynamo Corporation for 12