Saving Up Once Again

If you deposit $100 in one year, $200 in two years, and $300 in three years, how much will you have in three years? How much of this is interest? How much will you have in five years if you don't add additional amounts? Assume a 7 percent interest rate throughout.

We will calculate the future value of each amount in three years. Notice that the $100 earns interest for two years, and the $200 earns interest for one year. The final $300 earns no interest. The future values are thus:

$100 x 1.072 = $114.49 $200 x 1.07 = 214.00 + $300 = 300.00

Total future value = $628.49

The total future value is thus $628.49. The total interest is:

How much will you have in five years? We know that you will have $628.49 in three years. If you leave that in for two more years, it will grow to:

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