Cody invests $1,800 per year from his summer wages at a 4% annual interest rate.He plans to take a European vacation at the end of 4 years when he graduates from college.How much will he have available to spend on his vacation? (PV of $1,FV of $1,PVA of $1,and FVA of $1)$\bold{\text{(Use appropriate factor(s)from the tables provided.)}}$
A)$7,787.52
B)$7,488.00
C)$6,912.00
D)$7,200.00
E)$7,643.70

Question

Quizplus · Accepted Answer

Cody is making a series of equal annual investments, so this is an example of calculating the future value of an annuity. Using the Future Value of an Annuity (FVA) formula or table for 4 years at 4% interest, the factor is approximately 4.2464. Multiplying this factor by the annual investment amount ($1,800) gives the total amount available for his vacation: $1,800 * 4.2464 = $7,643.52 (rounded to $7,643.70 for the purpose of matching the provided options).

Cody Invests $1,800 Per Year from His Summer Wages at a 4