Renfro Corporation will invest £40,000 every December 31st for the next six years (2018 - 2023). If Renfro will earn 12% on the investment, what amount will be in the investment fund on December 31, 2023?

Question

Quizplus · Accepted Answer

We can solve the problem using the formula for future value of annuity:
FV = PMT x ((1 + r)^n - 1)/r
where FV is the future value, PMT is the periodic payment, r is the interest rate, and n is the number of periods.

Plugging in the given values, we get:
FV = £40,000 x ((1 + 0.12)^6 - 1)/0.12
FV = £40,000 x (2.012 - 1)/0.12
FV = £40,000 x 9.267
FV = £370,680

Therefore, the amount in the investment fund on December 31, 2023 will be £370,680. However, we need to subtract the last payment made on December 31, 2023 to get the final answer:
Final answer = £370,680 - £40,000
Final answer = £330,680

Therefore, the best choice is C, £324,608, which is the closest to our calculated final answer of £330,680.

Renfro Corporation Will Invest £40,000 Every December 31st for the Next