Compounding and Future Value

Question

A deposit of $270 earns the following interest rates:

 

8 percent in the first year.

6 percent in the second year.

5 percent in the third year.

 

What would be the third-year future value?

Answer 1

First Year Value = Principal/Deposit x (1.08) = 291.60 (outstanding balance-Y1)

Second Year Value = Outstanding Balance from Year 1 x (1.06) = 309.096 (outstanding balance-Y2)

Third Year Value = Outstanding Balance from Year 2 x (1.05) = 324.5508