Your investment rate of return is 6% per year and you invest according to the following schedule:
Beginning of year 1: $100 -
Beginning of year 2: $200 -
Beginning of year 3: $300 -
Beginning of year 4: $400 -
The amount you will have at the end of year 4 is:
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A. B. C. D.Explanation
This is a future value question. The amount at the end of year 4 = 100*(1.06^4) + 200*(1.06^3) + 300*(1.06^2) + 400*1.06 = 1,125
To calculate the amount you will have at the end of year 4, we need to calculate the future value of each investment and sum them up.
Given: Investment at the beginning of year 1: $100 Investment at the beginning of year 2: $200 Investment at the beginning of year 3: $300 Investment at the beginning of year 4: $400 Investment rate of return: 6% per year
Let's calculate the future value of each investment:
For the investment at the beginning of year 1: Future Value = $100 * (1 + 0.06)^4 = $100 * (1.06)^4 = $100 * 1.262476 = $126.25
For the investment at the beginning of year 2: Future Value = $200 * (1 + 0.06)^3 = $200 * (1.06)^3 = $200 * 1.191016 = $238.20
For the investment at the beginning of year 3: Future Value = $300 * (1 + 0.06)^2 = $300 * (1.06)^2 = $300 * 1.1236 = $337.08
For the investment at the beginning of year 4: Future Value = $400 * (1 + 0.06)^1 = $400 * (1.06)^1 = $400 * 1.06 = $424.00
Now, let's sum up the future values of all the investments: Total amount at the end of year 4 = $126.25 + $238.20 + $337.08 + $424.00 = $1,125.53
The correct answer is A. $1,125.