MATLAB: Interest rate – stagnant years.

Question

Hi.

I need to solve an assignment, where I need to know the end balance.

The assignment:

I have an account with an interest rate on 5%. A period over 10 years. 1000 dollars to start.

I need to know how to solve the assignment, where the first two years are stagnant, with no interest rate, so the balance after 2 years are still 1000 dollars, but from year 3 to 10, the interest rate will aply.

I need to create a vector, so I can see the balance for each year. How do I solve this??

Thanks in advance.

Answer 1

Define a vector with the interest rate for each year.

r = [zeros(1,2), 0.05*ones(1,8)]

Then the account Balance for each year is

1000 * cumprod(1+r)