Deposits of P1,000, P1,500, and P2,000 are made at the end of years 2, 3, and 4 into an account paying 10% annual interest. What is the total balance at year 4 ?
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Answer: C. P 4,860.00
Explanation
Compounding the scheduled cash deposits at 10% annual interest up to year 4 accumulates a total balance of P 4,860.00. Each individual deposit grows via compound interest for the exact remaining duration until the focal year four. Summing the future values of all separate cash flows yields the precise total accumulated account balance. Annuities and cash flow series require individual or systematic compounding to determine equivalent future financial values. The future value factor equals one plus the interest rate raised to the number of compounding periods. Time value of money principles dictate that money available at different dates cannot be directly added together.
Option A results from miscalculating the compounding duration exponents for one or more scheduled deposit flows. Option B fails to apply the correct 10 percent interest compounding factor across the appropriate time intervals. Option D represents simple interest calculations or arithmetic errors during the future worth summation process.
- Subject
- Engineering
- Category
- Civil Engineering
- Topic
- —
- Difficulty
- medium
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