Determine the amount of interest earned at the end of year 9 based on $3,000 annual payments received in years 1, 3 and 5 given an interest rate of 5.2% compounded annually.
A) $3,241.20
B) $3,456.99
C) $3,688.18
D) $3,939.72
E) $4,004.48

Question

Quizplus · Accepted Answer

The correct answer is A because the future value of the annuity is $3,241.20. The future value of an annuity is calculated using the following formula:FV = P * [(1 + r)^n - 1] / rwhere:P is the annual paymentr is the interest raten is the number of yearsIn this case, the annual payment is $3,000, the interest rate is 5.2%, and the number of years is 9. Plugging these values into the formula, we get:FV = 3,000 * [(1 + 0.052)^9 - 1] / 0.052= 3,000 * [1.58687 - 1] / 0.052= 3,000 * 0.58687 / 0.052= 3,241.20

Determine the Amount of Interest Earned at the End of Year