Suppose $100 is invested at the end of each year for the next 5 years into an account paying an interest rate r%p.a. How much can be drawn at the end of the 5 years?Approach(i) The first $100 is contributed in one year's time and has to wait 4 years to "mature". Write an equationdescribing this.(ii) The second $100 is contributed in two year's time and has to wait 3 years to "mature". Write an equationdescribing this.(iii) The third $100 is contributed in three year's time and has to wait 2 years to "mature". Write an equationdescribing this.(iv) Continue with this logic and sum all the matured values expressed

We can determine the future value of an amount using the formula below:In this formula, amount =…

Answered: (iv) Continue with this logic and sum…

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(iv) Continue with this logic and sum all the matured values expressed

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Question

Suppose $100 is invested at the end of each year for the next 5 years into an account paying an interest rate r%
p.a. How much can be drawn at the end of the 5 years?
Approach
(i) The first $100 is contributed in one year's time and has to wait 4 years to "mature". Write an equation
describing this.
(ii) The second $100 is contributed in two year's time and has to wait 3 years to "mature". Write an equation
describing this.
(iii) The third $100 is contributed in three year's time and has to wait 2 years to "mature". Write an equation
describing this.
(iv) Continue with this logic and sum all the matured values expressed

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