An individual is planning to set-up an education fund for his grandchildren. He plans to invest $10,000 annually at the end of each year. He 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? (^PV^of^$1, ^FV^of^$1, ^PVA^of^$1, and ^FVA^of^$1) (Use appropriate factor(s) from the tables provided.) A) $67,107 B) $100,000 C) $144,866 D) $46,320 E) $215,890

Question

Quizplus · Accepted Answer

Using the future value of an annuity formula, we can find the total value of the fund:
FV = PMT x [((1 + r)^n - 1) / r]
where PMT is the annual investment, r is the annual interest rate, and n is the number of years.

In this case, PMT = $10,000, r = 8%, and n = 10.
FV = $10,000 x [((1 + 0.08)^10 - 1) / 0.08] = $144,866.

Therefore, the total value of the fund at the end of 10 years will be $144,866. Therefore, the best choice is C. We can use the future value of an annuity formula to calculate the total value of the fund at the end of 10 years:

FV = PMT x (((1 + r)^n - 1) / r)

where PMT is the annual payment, r is the annual interest rate, and n is the number of periods (in this case, 10).

Plugging in the values, we get:

FV = $10,000 x (((1 + 0.08)^10 - 1) / 0.08)
FV = $10,000 x (2.158925 - 1) 
FV = $10,000 x 1.158925
FV = $11,589.25 (future value of each annual payment)

To find the total value of the fund, we need to calculate the future value of the annuity:

FV = $11,589.25 x (((1 + 0.08)^10 - 1) / 0.08)
FV = $11,589.25 x (2.158925 - 1)
FV = $11,589.25 x 1.158925
FV = $13,411.19

Therefore, the total value of the fund at the end of 10 years will be approximately $144,866.

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