If $10,000 per year is deposited at 8% starting today and at the beginning of each of the next five years (6 deposits), the amount on deposit will be:
A)$46,229.
B)$73,359.
C)$49,927.
D)$79,228.

Question

Quizplus · Accepted Answer

Using the formula for the future value of an annuity due, we can calculate the total amount on deposit at the end of the six years:
$FV = P\cdot\frac{(1 + r)^n-1}{r}\cdot(1+r) + P \cdot\frac{(1+r)^{n-1}-1}{r}$
$FV = 10,000\cdot\frac{(1+0.08)^6-1}{0.08}\cdot1.08 + 10,000\cdot\frac{(1+0.08)^5-1}{0.08}$
$FV = 79,228.29$
Therefore, the best choice is (D), $79,228.

If $10,000 Per Year Is Deposited at 8% Starting Today