What is the future value of $1,200 a year for 40 years at 8 percent interest? Assume annual compounding.

Question

Quizplus · Accepted Answer

We can use the formula for future value of an annuity:

FV = PMT x (((1 + r)^n - 1) / r)

Where:
PMT = $1,200 (the annual payment)
r = 8% (the interest rate)
n = 40 (the number of years)

Plugging in the values, we get:

FV = $1,200 x (((1 + 0.08)^40 - 1) / 0.08) = $310,868

Therefore, the best choice is C, as it matches our calculated value.

What Is the Future Value of $1,200 a Year for 40