Louie just got a big raise and wants to begin investing his excess cash flow. If he invests $7,500 per year for the next 30 years, and earns 5% on his investments, how much money will he have when he is nearing retirement?
A) $385,567
B) $500,000
C) $498,291
D) $265,987

Question

Quizplus · Accepted Answer

This is a future value of an annuity problem, where Louie makes regular investments (annuity payments) of $7,500 per year for 30 years with an annual interest rate of 5%. The formula to calculate the future value of an annuity is FV = P * [((1 + r)^n - 1) / r], where P is the payment amount, r is the annual interest rate, and n is the number of payments. Plugging in the values: FV = $7,500 * [((1 + 0.05)^30 - 1) / 0.05], which calculates to approximately $498,291.

Louie Just Got a Big Raise and Wants to Begin