You are expecting to receive $70 per year at the end of each of the next five years.If you invest the money in account that pays 5%,then how much interest will you earn over the five years? (Round to the nearest whole dollar)
A) $37
B) $18
C) $75
D) $350
E) $387

Question

Quizplus · Accepted Answer

Step 1 - Calculate the future value of the ordinary annuity.
FV = PMT × 11ea7fdb_fc15_48f1_a768_e7e852ce917a_TB2902_11 FV = 70 × 11ea7fdb_fc15_48f2_a768_83f374979cd0_TB2902_11 = $386.79
Using a financial calculator:
N = 5, I/Y = 5, PV = 0, PMT = -70, cpt FV = $386.79
Step 2 - To find the interest earned, subtract the value of the cash flows from the total in Step 1.
386.79 - (5 × $70) = $36.79

You Are Expecting to Receive $70 Per Year at the End