How do I work this out?
Mrs Caine contributes $1000 on the day of her son's birth, and increases her annual contribution by 6% each year. Her investment also earns 6% compound interest per annum. Fine the total value of Mrs Caine's investment on her son's third birthday (just before she makes her fourth contribution.)
Thank you!
Hey f_tan! We can just step through this one:
On the day of her sons birth, we have \($1000\).
After 1 year, we have gained 6% interest - Going up to \(1.06($1000)=$1060\).
We then make another annual contribution, which is 6% higher than the previous contribution of \($1000\). So we add \(1.06(1000)=$1060\) to that total, giving a total of \($2120\)! That's after the child's first birthday!
Continue this process - Apply 6% interest, then make an annual contribution of 6% greater than previous - You need to do it twice more to get to the third birthday, but remember
not to add the final contribution!! Does this help?
