If you invest $1,600 at the end of every year for four years at an interest rate of 14%, the balance of your investment in 4 years will be closest to: Future Value of $1
Future Value of Annuity of $1

Question

If you invest $1,600 at the end of every year for four years at an interest rate of 14%, the balance of your investment in 4 years will be closest to: Future Value of $1
 Future Value of Annuity of $1

Quizplus · Accepted Answer

Using the formula for future value of an annuity:

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

where PMT is the annual payment, r is the interest rate, and n is the number of years.

Substituting the given values:

FV = 1600 x ((1 + 0.14)^4 - 1) / 0.14 
FV = 1600 x 5.187 / 0.14 
FV = 59,748 / 0.14 
FV = 426057.14

Rounding to the nearest dollar gives an answer of $7,874, which is closest to choice C.

If You Invest $1,600 at the End of Every Year