Your employer gives you a stock bonus of $1,000 in your company at the beginning of each year.You plan to retire in 20 years.The stock has a growth rate of 15 percent per annum.How much would your employer give you in stock bonuses during the twenty years?
A)$20,000
B)$1,000
C)$15,000
D)none of the above

Question

Quizplus · Accepted Answer

To find the total amount the employer will give in stock bonuses over 20 years, we simply need to calculate the sum of the bonuses each year for 20 years. 
Bonus amount = $1,000 
Growth rate = 15% per annum 
Number of years = 20

Using the formula for the future value of an annuity: 
FV = PMT * ( (1 + r)^n - 1 ) / r

where: 
PMT = annual payment (bonus amount) = $1,000 
r = interest rate per period = 15% / year 
n = number of periods = 20 years

FV = $1,000 * ( (1 + 0.15)^20 - 1 ) / 0.15 
FV = $1,000 * ( (3.010927 - 1) / 0.15 ) 
FV = $1,000 * 13.406854 
FV = $13,406.85

Therefore, the employer will give a total of $13,406.85 in stock bonuses over 20 years, which is closest to answer choice A, $20,000.

Your Employer Gives You a Stock Bonus of $1,000 in Your