Harlan Corporation deposits $225,000 every June 30th and December 31st in a savings account (beginning in the current year) for the next three years so that it can purchase a new piece of machinery at the end of three years. The interest rate is 4%. How much money will Harlan Corporation have at the end of three years? Use the future value of an ordinary annuity factor table shown below to derive your answer.
$$\begin{array} { | c | c | c | c | c | }
\hline \text { Periods } & \mathbf { 1 \% } & \mathbf { 2 } \% & \mathbf { 3 } \% & \mathbf { 4 } \% \
\hline 1 & 1 & 1 & 1 & 1 \
\hline 2 & 2.01000 & 2.02000 & 2.03000 & 2.04000 \
\hline 3 & 3.03010 & 3.06040 & 3.09090 & 3.12160 \
\hline 4 & 4.06040 & 4.12161 & 4.18363 & 4.24646 \
\hline 5 & 5.10101 & 5.20404 & 5.30914 & 5.41632 \
\hline 6 & 6.15202 & 6.30812 & 6.46841 & 6.63298 \
\hline 7 & 7.21354 & 7.43428 & 7.66246 & 7.89829 \
\hline 8 & 8.28567 & 8.58297 & 8.89234 & 9.21423 \
\hline 9 & 9.36853 & 9.75463 & 10.15911 & 10.58280 \
\hline 10 & 10.46221 & 10.94972 & 11.46388 & 12.00611 \
\hline
\end{array}$$
A) $1,419,327
B) $688,590
C) $1,492,421
D) $702,360

Question

Harlan Corporation deposits $225,000 every June 30th and December 31st in a savings account (beginning in the current year) for the next three years so that it can purchase a new piece of machinery at the end of three years. The interest rate is 4%. How much money will Harlan Corporation have at the end of three years? Use the future value of an ordinary annuity factor table shown below to derive your answer.
$$\begin{array} { | c | c | c | c | c | } 
\hline \text { Periods } & \mathbf { 1 \% } & \mathbf { 2 } \% & \mathbf { 3 } \% & \mathbf { 4 } \% \
\hline 1 & 1 & 1 & 1 & 1 \
\hline 2 & 2.01000 & 2.02000 & 2.03000 & 2.04000 \
\hline 3 & 3.03010 & 3.06040 & 3.09090 & 3.12160 \
\hline 4 & 4.06040 & 4.12161 & 4.18363 & 4.24646 \
\hline 5 & 5.10101 & 5.20404 & 5.30914 & 5.41632 \
\hline 6 & 6.15202 & 6.30812 & 6.46841 & 6.63298 \
\hline 7 & 7.21354 & 7.43428 & 7.66246 & 7.89829 \
\hline 8 & 8.28567 & 8.58297 & 8.89234 & 9.21423 \
\hline 9 & 9.36853 & 9.75463 & 10.15911 & 10.58280 \
\hline 10 & 10.46221 & 10.94972 & 11.46388 & 12.00611 \
\hline
\end{array}$$
A) $1,419,327
B) $688,590
C) $1,492,421
D) $702,360

Quizplus · Accepted Answer

The future value of an ordinary annuity is calculated as follows:FV = P * [(1 + r)^n - 1] / rwhere:P is the periodic paymentr is the interest raten is the number of periodsIn this case, P = $225,000, r = 4%, and n = 6 (since there are 6 semi-annual payments over 3 years).Plugging these values into the formula, we get:FV = $225,000 * [(1 + 0.04)^6 - 1] / 0.04= $225,000 * [1.26532 - 1] / 0.04= $225,000 * 0.26532 / 0.04= $1,419,327Therefore, the correct answer is A) $1,419,327.

Harlan Corporation Deposits $225,000 Every June 30th and December 31st