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February 16th, 2014, 02:07 PM   #1
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Future value: what's wrong here?

"Thirteen years ago, you deposited $2,400 into an account. Eight years ago, you added an additional $1,000 to this account. You earned 8 percent, compounded annually, for the first 5 years and 5.5 percent, compounded annually, for the last 8 years. How much money do you have in your account today?"

2400(1.0^5+3400(1.055)^8 is the formula I'm running and coming up with $8744.32 for the answer, but that's not anywhere near the choices of:
a. $4,666.67
b. $4,717.29
c. $5,411.90
d. $6,708.15
e. $6,946.59

What am I doing wrong?
I have run my equation several times with special attention to order of operations and still getting same result
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February 16th, 2014, 02:18 PM   #2
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Re: Future value: what's wrong here?

Quote:
Originally Posted by zniets
"Thirteen years ago, you deposited $2,400 into an account. Eight years ago, you added an additional $1,000 to this account. You earned 8 percent, compounded annually, for the first 5 years and 5.5 percent, compounded annually, for the last 8 years. How much money do you have in your account today?"

2400(1.0^5+3400(1.055)^8 is the formula I'm running and coming up with $8744.32
What am I doing wrong?
I'd definitely like you to be my banker! The first bit of your calculation is correct: after 5 years you have 2400*(1.0^5.

But, then you've added $3400 and started paying interest on that.

What you want to do is add $1000 to get: 2400*(1.0^5 + 1000. You then have 8 years interest on this.
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February 16th, 2014, 02:20 PM   #3
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Re: Future value: what's wrong here?

Just figured that out and then your response confirmed my answer. Thank you!
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