An individual is planning to set-up an education fund for her children. She plans to invest $10,000 annually at the end of each year. She expects to withdraw money from the fund at the end of 10 years and expects to earn an annual return of 8%. What will be the total value of the fund at the end of 10 years?
A) $46,320.
B) $67,107.
C) $100,000.
D) $144,870.
E) $215,890.

Question

Quizplus · Accepted Answer

Using the formula for future value of an annuity:
FV = Pmt x [(1 + r)^n - 1] / r
Where FV = future value, Pmt = annual deposit, r = rate of return, and n = number of years.

FV = $10,000 x [(1 + 0.08)^10 - 1] / 0.08
FV = $10,000 x 14.4867
FV = $144,867

Therefore, the total value of the fund at the end of 10 years will be $144,870. 
The best choice is D, because it is the only option that matches this calculation.

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