Future Value of Multiple Annuities Assume that you contribute $100 per month to a retirement plan for 20 years.Then you are able to increase the contribution to $200 per month for another 20 years.Given a 6 percent interest rate,what is the value of your retirement plan after 40 years?
A)$225,353
B)$19,155
C)$245,353
D)$199,359

Question

Quizplus · Accepted Answer

To calculate the future value of multiple annuities, we can use the formula:

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

Where Pmt is the monthly contribution, r is the interest rate per month (6%/12 = 0.5%), n is the total number of months (20 years = 240 months for the first annuity, and 40 years = 480 months for the second annuity).

First annuity:

FV1 = $100 x (((1 + 0.005)^240 - 1) / 0.005) = $47,073.33

Second annuity:

FV2 = $200 x (((1 + 0.005)^480 - 1) / 0.005) = $198,280.68

Total future value:

FV = FV1 + FV2 = $47,073.33 + $198,280.68 = $245,353.01

Therefore, the best choice is C.

Future Value of Multiple Annuities Assume That You Contribute $100