Aucutt Incorporated deposits $200,000 every January 1st and July 1st in a savings account for the next five years so that it can purchase a new piece of machinery at the end of five years. The interest rate is 12%. How much money will Aucutt Incorporated have at the end of five years? (Use spreadsheet software or a financial calculator to calculate your answer. Do not round any intermediary calculations, and round your final answer to the nearest dollar.)
A) $2,794,329
B) $2,636,159
C) $1,423,038
D) $1,270,569

Question

Quizplus · Accepted Answer

The correct answer is A because the future value of the annuity can be calculated using the formula: FV = P * ((1 + r)^n - 1) / r, where P is the periodic payment, r is the interest rate, and n is the number of periods. In this case, P = $200,000, r = 12%, and n = 10 (since there are 10 semi-annual payments over 5 years). Plugging these values into the formula, we get FV = $2,794,329.

Aucutt Incorporated Deposits $200,000 Every January 1st and July 1st