Maxine invests 1000 at the end of each year for 5 years at an effective rate of .10 per year, with interest payable annually. She reinvests the interest each year at rate .08 per year.

Find the accumulated value at the end of 5 years.

• 5867
• 6000
• 6084
• 6105
• 6150

References

Hlynka, Myron. "University of Windsor Old Tests 62-392 Theory of Interest". web2.uwindsor.ca. Retrieved November 23, 2023.

Solution: C

The time diagram is

Time	0	1	2	3	4	5
Deposit		1000	1000	1000	1000	1000
CumDeposit		1000	2000	3000	4000	5000
Interest			100	200	300	400

Hence the accumulated amount is

[[math]] 5000+100(I s)_{\overline{4} \mid .08}=5000+100 \frac{\ddot{s}_{\overline{4} \mid .08}-4}{.08}=5000+100 \frac{4.866601-4}{.08}=6083.25 [[/math]]

References

Hlynka, Myron. "University of Windsor Old Tests 62-392 Theory of Interest". web2.uwindsor.ca. Retrieved November 23, 2023.