Financial Technology Center - School of Business - Central Connecticut State University

To save money for a new house, you want to begin contributing money to a brokerage account. Your plan is to make 10 contributions to the brokerage account. Each contribution will be for $1,500. The contributions will come at the beginning of each of the next 10 years. The first contribution will be made at t = 0 and the final contribution will be made at t = 9. Assume that the brokerage account pays a 9 percent return with Annual compounding. How much money do you expect to have in the brokerage account nine years from now (t = 9)?

Financial calculator solution.
Calculate the FV of all but the final payment.
Change your calculator to BEGIN mode.
Inputs.
N =9 * 1
I = 9 / 1
PV = 0

PMT = -1500

Output: FV = 21,289.3945

You must then add the $1,500 at t = 9 to find the answer

 FV=21,289.3945+1500=22,789.3945

 

t	PMT	How long it is going to stay in the Bank
0	1500	9
1	1500	8
2	1500	7
3	1500	6
4	1500	5
5	1500	4
6	1500	3
7	1500	2
8	1500	1
9	1500	0