Ann Ruth wants to invest a certain sum of money at the end of each year for five years. The investment will earn 6% compounded annually. At the end of five years, she will need
A total of $40,000 accumulated. How should she compute her required annual invest-ment?
A) $40,000 times the future value of a 5-year, 6% ordinary annuity of 1.
B) $40,000 divided by the future value of a 5-year, 6% ordinary annuity of 1.
C) $40,000 times the present value of a 5-year, 6% ordinary annuity of 1.
D) $40,000 divided by the present value of a 5-year, 6% ordinary annuity of 1.

Question

Quizplus · Accepted Answer

To find the required annual investment to accumulate a total of $40,000 at the end of five years with a 6% annual interest rate, one should divide $40,000 by the future value of a 5-year, 6% ordinary annuity of 1. This calculation determines how much needs to be invested each year to reach the desired future sum.

Ann Ruth Wants to Invest a Certain Sum of Money