Joe Sullivan invests $9,000 at the end of each year for 20 years. The rate of interest Joe earns is 8% annually. The final value of Joe's investment at the end of the 20th year on this ordinary annuity is (use the tables in the handbook):

Question

Quizplus · Accepted Answer

Using the formula for the Future Value of an Ordinary Annuity:

$FV=\frac{P((1+r)^n-1)}{r}$

Where:
P = Periodic payment (amount invested each year)
r = Interest rate per period
n = Number of periods

We can calculate Joe's final investment value:

$FV = \frac{9000((1+0.08)^{20}-1)}{0.08}$

$FV \approx \$411,858.00$

Therefore, the best choice is C) $411,858.00.

Joe Sullivan Invests $9,000 at the End of Each Year