If you invest $1,000 at the end of every year for five years at an interest rate of 10%, the balance of your investment in 5 years will be closest to

Question

Quizplus · Accepted Answer

Using the formula for the future value of an annuity:
FV = PMT x [(1 + r)^n - 1] / r
where:
PMT = payment (amount invested every year) = $1,000
r = interest rate = 10% = 0.1
n = number of periods = 5
FV = $1,610.51 x (1 + 0.1)^5 = $6,104.96
Therefore, the balance of the investment in 5 years will be closest to $6,105. Choice D is the correct answer.

If You Invest $1,000 at the End of Every Year