For next year's vacation, the Phelps family is saving $100 each month in an account paying 7% annual interest, compounded monthly.How much will be available a year from now?
A)$1,239.26
B)$1,245.46
C)$1,227.56
D)$1,231.26
E)$1242.36

Question

Quizplus · Accepted Answer

The correct answer is A because the future value of an annuity is given by the formula FV = P * ((1 + r/n)^(nt) - 1) / (r/n), where P is the monthly payment, r is the annual interest rate, n is the number of times per year that the interest is compounded, and t is the number of years. In this case, P = $100, r = 7%, n = 12, and t = 1. Plugging these values into the formula, we get FV = $1,239.26.

For Next Year's Vacation, the Phelps Family Is Saving $100