Annuity due: Jenny Abel 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, how much will she have at the end of seven years? (Round to the nearest dollar.)

Question

Quizplus · Accepted Answer

This problem involves an annuity due where payments are made at the beginning of each period. Using the formula for the future value of an annuity due, FV = PMT x [(1 + r) x ((1 + r)^n - 1) / r], with PMT = $2,500, r = 12%/year, n = 7, we get:
FV = $2,500 x [(1 + 0.12) x ((1 + 0.12)^7 - 1) / 0.12] = $28,248.68, which rounds to $28,249. Therefore, choice B is the best answer.

Annuity Due: Jenny Abel Is Investing $2,500 Today and Will