Renfro Corporation will invest $30,000 every December 31st for the next six years (2012 - 2017).If Renfro will earn 12% on the investment, what amount will be in the investment fund on December 31, 2017?

Question

Quizplus · Accepted Answer

Using the formula for the future value of an annuity due:
FV = PMT((1 + i)^n - 1)/i) x (1+i)
where PMT is the periodic payment, i is the interest rate, n is the number of periods.

Plugging in the values:
PMT = 30,000
i = 0.12
n = 6
FV = 30,000 x ((1.12^6 - 1)/0.12) x 1.12
FV = $272,670.

Renfro Corporation Will Invest $30,000 Every December 31st for the Next