Claudine Corporation will deposit $5,000 into a money market sinking fund at the end of each year for the next five years. How much will accumulate by the end of the fifth and final payment if the sinking fund earns 9% interest?

Question

Quizplus · Accepted Answer

We use the formula for future value of an annuity (FVA) to calculate the amount that will accumulate by the end of the fifth and final payment:

FVA = $5,000 x 5.9847* = $29,924

*We use a table or financial calculator to find the FVA factor for n=5 and i=9%

Therefore, the best choice is B, $29,924.

Claudine Corporation Will Deposit $5,000 into a Money Market Sinking