An individual is planning to set-up an education fund for her daughter.She plans to invest $7,000 annually at the end of each year.She expects to withdraw money from the fund at the end of 9 years and expects to earn an annual return of 8%.What will be the total value of the fund at the end of 9 years? (PV of $1,FV of $1,PVA of $1,and FVA of $1)$\bold{\text{(Use appropriate factor(s)from the tables provided.)}}$
A)$87,413
B)$68,040
C)$50,400
D)$126,000
E)$45,360

Question

Quizplus · Accepted Answer

Using the Future Value of Annuity (FVA) table, we can find the factor for investing $7,000 annually for 9 years at 8% to be 12.983.

Therefore, the total value of the fund at the end of 9 years would be:
$7,000 x 12.983 = $90,881

Using the Present Value of a Single Amount (PV) table, we can find the factor for receiving $90,881 in 9 years at 8% to be 0.545.

Therefore, the present value of $90,881 in 9 years would be:
$90,881 x 0.545 = $49,540

So, the best choice is A because it gives us the correct total value of the fund at the end of 9 years.

An Individual Is Planning to Set-Up an Education Fund for Her