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Contributing money to an investment account - house purchase

You are contributing money to an investment account so that you can purchase a house in five years. You plan to contribute six payments of $3,000 a year. The first payment will be made today (t = 0) and the final payment will be made five years from now (t = 5). If you earn 11 percent in your investment account, how much money will you have in the account five years from now (at t = 5)?

a. $19,412
b. $20,856
c. $21,683
d. $23,739
e. $26,350

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Answer: D

The total value 5 years from now will be:
$3,000 * (1.11)^5 + $3,000 * (1.11)^4 + $3,000 * ...

Solution Summary

This solution analyzes the amount of money available to purchase a house five years from now.