Johnson has an annuity due that pays $600 per year for 15 years.(Note: There are 15 annual cash flows with the first cash flow occurring today.)What is the value of the cash flows 14 years from today (immediately after the last deposit is made)if they are placed in an account that earns 7.50%?
A)$9,000.00
B)$9,675.00
C)$15,671.02
D)$16,846.35

Question

Quizplus · Accepted Answer

To find the future value of the cash flows 14 years from today, we need to use the formula:
FV = PMT [(1 + r)n - 1] / r
where PMT is the annual payment, r is the interest rate, and n is the number of years.

Substituting the values given, we get:
FV = 600 [(1 + 0.075)15 - 1] / 0.075
FV = $15,671.02

Therefore, the value of the cash flows after 14 years is $15,671.02, which is option C.

Johnson Has an Annuity Due That Pays $600 Per Year