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)?
The total value 5 years from now will be:
$3,000 * (1.11)^5 + $3,000 * (1.11)^4 + $3,000 * ...
This solution analyzes the amount of money available to purchase a house five years from now.