If you are saving for a plane ticket for a future vacation and you deposit $200 today, followed by $250 at the end of the first year, and a $300 deposit at the end of the second year, what will the future value of your deposits be in 3 years if the interest rates are 5%?
A) $750
B) $822.15
C) $787.5
D) None of the above

Question

Quizplus · Accepted Answer

To calculate the future value of these deposits, we use the formula for future value of a single sum for each deposit, which is FV = PV(1 + r)^n, where FV is the future value, PV is the present value, r is the annual interest rate, and n is the number of years until maturity. For the $200 deposit today, it will grow for 3 years, the $250 deposit for 2 years, and the $300 deposit for 1 year. Calculating each: $200(1 + 0.05)^3 = $231.525, $250(1 + 0.05)^2 = $276.25, and $300(1 + 0.05)^1 = $315. The total future value is $231.525 + $276.25 + $315 = $822.775, which rounds to $822.15, making option B the correct answer.

If You Are Saving for a Plane Ticket for a Future