A twenty year-old college student decides to forgo coffee at Starbucks and instead invest the saved $600 per year into a mutual fund earning 6% compounding annually. The amount he would have in the fund by age 65 is closest to:
A) $30,696.07
B) $315,515.24
C) $1,798,973.08

Question

Quizplus · Accepted Answer

Using the formula for future value of an annuity, $FV = P \times \frac{(1 + r)^n - 1}{r}$, where P = $600, r = 0.06 (6%), and n = 45 years (65 - 20), the calculation gives a value closest to $315,515.24. This formula accounts for annual investments at a fixed interest rate compounded annually.

A Twenty Year-Old College Student Decides to Forgo Coffee at Starbucks