If a company wishes to accumulate $500,000 in 20 years at 5% by making equal yearly deposits into an account,calculation of the deposits is an application of the
A)future value of a single amount.
B)present value of a single amount.
C)future value of an annuity.
D)present value of an annuity.

Question

Quizplus · Accepted Answer

The scenario describes a situation where equal yearly deposits need to be made to accumulate a future value, which is an example of an annuity. The calculation needed to determine the size of the deposits is a future value of an annuity calculation, as the deposits will earn interest over the 20-year period. Therefore, the correct choice is the future value of an annuity.

If a Company Wishes to Accumulate $500,000 in 20 Years