Jackie and her husband started a savings account for their twin daughters when they were 2 years old.They have been saving $100,000 a year at an interest rate of 10%,and intend on keeping up with their annual contribution to the fund until the girls are 21.What is the future value of their investment?
A)$864,869.43
B)$836,492.01
C)$5,115,909.05
D)$6,400,249.94
E)$2,090,000

Question

Quizplus · Accepted Answer

We can use the formula for future value of ordinary annuity to solve this problem:

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

Where:
PMT = $100,000 (annual contribution)
r = 10% (interest rate)
n = 20 (number of years until the girls turn 21)

FV = $100,000 x (((1 + 0.10)^20 - 1) / 0.10) = $5,115,909.05

Therefore, the future value of their investment is $5,115,909.05, which is option C.

Jackie and Her Husband Started a Savings Account for Their