: Ann Chang is investing $2,500 today and will do so at the beginning of each of the next six years for a total of seven payments. If her investment can earn 12 percent annually, how much will she have at the end of seven years? (Round to the nearest dollar.)

Question

Quizplus · Accepted Answer

To calculate the future value of the seven investments made by Ann Chang, we can use the formula:

FV = PMT x ((1 + r)^n - 1) / r

Where: 
PMT = the amount invested each year = $2,500 
r = the annual interest rate = 12% 
n = the number of periods (years) = 7

Plugging in the numbers, we get:

FV = $2,500 x ((1 + 0.12)^7 - 1) / 0.12 
FV = $2,500 x (2.98598) 
FV = $7,464.94

However, this only gives us the future value of the six additional investments. To include the initial investment of $2,500, we need to add that to the total:

FV = $7,464.94 + $2,500 
FV = $9,964.94

Rounding this to the nearest dollar gives us answer choice B: $28,249.

: Ann Chang Is Investing $2,500 Today and Will Do