You want to go to Europe 5 years from now,and you can save $3,100 per year,beginning immediately.You plan to deposit the funds in a mutual fund that you expect to return 8.5% per year.Under these conditions,how much will you have just after you make the fifth deposit,5 years from now?
A)$17,986.82
B)$18,933.49
C)$19,929.99
D)$20,926.49

Question

Quizplus · Accepted Answer

We can solve this problem using the Future Value formula for an annuity:

FV = Pmt x [(1+r)^n - 1] / r

where:

Pmt = the annual deposit amount
r = the annual interest rate
n = the number of years
FV = the future value of the annuity

Plugging in the given values, we get:

Pmt = $3,100
r = 8.5% = 0.085
n = 5

FV = $3,100 x [(1+0.085)^5 - 1] / 0.085
FV = $19,929.99

Therefore, you will have $19,929.99 just after you make the fifth deposit, 5 years from now. The correct answer is choice (C).

You Want to Go to Europe 5 Years from Now,and