Kevin Nathan will deposit $1, 000 into a special account each year beginning December 31, 2010, with the last deposit being made on December 31, 2014.Kevin wants to know how much will be in his account on December 31, 2014, immediately after the final deposit, if the account earns 12% compounded annually.To solve the problem, Kevin must find the
A)future value of a single sum
B)future value of a deferred annuity
C)future value of an ordinary annuity
D)future value of an annuity due

Question

Quizplus · Accepted Answer

Kevin is depositing a fixed amount each year into the account, which is a series of payments known as an ordinary annuity. He wants to know the future value of this annuity on a specified date, which is the amount that will be in the account on December 31, 2014, immediately after the final deposit. Therefore, choice C, which is the future value of an ordinary annuity, is the best option for solving this problem.

Kevin Nathan Will Deposit $1, 000 into a Special Account