Assume you are to receive a 10-year annuity with annual payments of $100.The first payment will be received at the end of Year 1,and the last payment will be received at the end of Year 10.You will invest each payment in an account that pays 9 percent compounded annually.Although the annuity payments stop at the end of year 10,you will not withdraw any money from the account until 20 years from today,and the account will continue to earn 9% for the entire 20-year period.What will be the value in your account at the end of Year 20 (rounded to the nearest dollar)?
A) $38,359
B) $35,967
C) $28,000
D) $19,000

Question

Quizplus · Accepted Answer

The present value of the annuity is $671.82 ($100 x 6.7182) using the formula PV = PMT x [(1 - (1 / (1 + r)^n)) / r], where r is the discount rate and n is the number of periods. Then, we can invest this amount for 20 years at 9% compounded annually to get the future value of $35,967.

Assume You Are to Receive a 10-Year Annuity with Annual