How much would you have to invest each quarter in an annuity earning 5% quarterly to earn $20,000 at the end of 20 years?
A) $84.77
B) $98.83
C) $146.93
D) $152.15

Question

Quizplus · Accepted Answer

Using the formula for the future value of an annuity:

FV = PMT * [(1 + r)^n - 1] / r

where 
PMT = Amount invested each quarter
r = quarterly interest rate = 5% / 4 = 0.0125
n = 20 years * 4 quarters/year = 80 quarters
FV = $20,000

We can solve for PMT:

PMT = FV * r / [(1 + r)^n - 1]

PMT = $20,000 * 0.0125 / [(1 + 0.0125)^80 - 1]

PMT = $146.93

Therefore, the answer is choice C.

How Much Would You Have to Invest Each Quarter in an Annuity