On January 1, 2018, Kline Company decided to begin accumulating a fund for asset replacement five years later. The company plans to make five annual deposits of £80,000 at 9% each January 1 beginning in 2018. What will be the balance in the fund, within $10, on January 1, 2023 (one year after the last deposit)? The following 9% interest factors may be used.

Question

Quizplus · Accepted Answer

We can use the formula for future value of an annuity to calculate the balance in the fund after the fifth deposit:
FV = PMT x ((1 + r)^n - 1) / r
where:
PMT = £80,000
r = 9% = 0.09
n = 5

FV = £80,000 x ((1 + 0.09)^5 - 1) / 0.09
FV = £521,866.09

Therefore, the balance in the fund on January 1, 2023 will be approximately £521,866, which is closest to answer choice A.

On January 1, 2018, Kline Company Decided to Begin Accumulating