On January 1, 2014, Kline Company decided to begin accumulating a fund for asset replacement five years later. The company plans to make five annual deposits of $50,000 at 9% each January 1 beginning in 2014. What will be the balance in the fund, on January 1, 2019 (one year after the last deposit)? The following 9% interest factors may be used.Present Value of Future Value of

Question

Quizplus · Accepted Answer

To find the balance in the fund on January 1, 2019, we need to calculate the future value of the five annual deposits of $50,000 each made at 9% interest.

Using the Future Value of an Annuity formula, we get:

FV = PMT x [(1 + r)^n - 1] / r

where FV is the future value, PMT is the annuity payment (which is $50,000 in this case), r is the interest rate (9%), and n is the number of periods (which is 5 since we are making five annual deposits).

Plugging in the values, we get:

FV = $50,000 x [(1 + 0.09)^5 - 1] / 0.09 = $326,165

Therefore, the balance in the fund on January 1, 2019 (one year after the last deposit) will be $326,165.

Option A is the correct answer.

On January 1, 2014, Kline Company Decided to Begin Accumulating