If you begin saving $2,000 a year at 5% (from age 22 to age 30 or 9 years), what will these funds grow to in this time period?

Question

Quizplus · Accepted Answer

Using the formula for future value of an annuity:

FV = PMT × [(1 + r)n – 1] ÷ r

Where PMT = 2,000 (annual savings), r = 0.05 (annual interest rate), and n = 9 (number of years).

FV = 2,000 × [(1 + 0.05)9 – 1] ÷ 0.05
FV = $22,054

Therefore, the funds will grow to $22,054 in this time period. The correct answer is D.

If You Begin Saving $2,000 a Year at 5% (From