Spencer Corporation will invest €20,000 every December 31st for the next six years (2018 - 2023). If Spencer will earn 12% on the investment, what amount will be in the investment fund on December 31, 2023?

Question

Quizplus · Accepted Answer

To solve this problem, we can use the future value formula for an ordinary annuity:

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

Where:
Pmt = periodic payment (€20,000)
r = interest rate per period (12% / year)
n = number of periods (6 years)

Filling in the values, we get:

FV = 20,000 x (((1 + 0.12)^6) - 1) / 0.12 = €162,304

Therefore, the amount in the investment fund on December 31, 2023, will be €162,304 option C.

Spencer Corporation Will Invest €20,000 Every December 31st for the Next