A large Ontario municipality signed a four-year lease on paving equipment where payments of $71,698 are made at the beginning of each year with an interest rate of 10% per year, compounded annually. By the end of the contract, what will be the total cost to the city?

Question

Quizplus · Accepted Answer

The future value of an annuity is given by the formula:FV = P * ((1 + r)^n - 1) / rwhere:P is the payment amountr is the interest raten is the number of periodsIn this case, we have:P = $71,698r = 10% = 0.1n = 4Plugging these values into the formula, we get:FV = $71,698 * ((1 + 0.1)^4 - 1) / 0.1= $71,698 * (1.4641 - 1) / 0.1= $71,698 * 0.4641= $332,750Therefore, the total cost to the city will be $332,750.

A Large Ontario Municipality Signed a Four-Year Lease on Paving