You want to be able to travel and withdraw $3750 at the end of every month during your yearlong trip. During your trip your travel fund will earn 6.24% compounded monthly. What is the size of your travel fund if you want to be able to start your trip in 4 years and 7 months?
A) $32 715.58
B) $45 315.20
C) $2849.74
D) $46 309.57
E) $45 555.20

Question

Quizplus · Accepted Answer

The correct answer is A because the future value of an annuity is calculated using the formula: FV = P * ((1 + r/n)^(n*t) - 1) / (r/n), where P is the payment, r is the annual interest rate, n is the number of compounding periods per year, and t is the number of years. In this case, P = $3750, r = 6.24%, n = 12, and t = 4.625 (4 years and 7 months). Plugging these values into the formula, we get FV = $32,715.58.

You Want to Be Able to Travel and Withdraw $3750