A company wishes to make annual contributions into a fund intended to retire $400,000 in debt five years from now.The amount to contribute each year equals $400,000
A) divided by the appropriate future value of an ordinary annuity factor.
B) times the appropriate present value of an ordinary annuity factor.
C) times the appropriate future value of an ordinary annuity factor.
D) divided by the appropriate present value of an ordinary annuity factor.

Question

Quizplus · Accepted Answer

The correct answer is A because the company wants to find the amount to contribute each year to retire $400,000 in debt five years from now. The future value of an ordinary annuity factor is used to find the present value of a series of equal payments made at the end of each period.

A Company Wishes to Make Annual Contributions into a Fund