How much money must you pay into an account at the beginning of each of five years in order to have $5,000 at the end of the fifth year? Assume that the account pays 12% per year, and round to the nearest $1.00.
A) $703
B) $1,390
C) $1,550
D) $787

Question

Quizplus · Accepted Answer

The problem involves calculating the annuity payment using the future value of an annuity formula. The future value of an annuity formula is FV = Pmt * [(1 + r)^n - 1] / r, where FV is the future value, Pmt is the annuity payment, r is the interest rate, and n is the number of periods. Solving for Pmt with FV = $5,000, r = 0.12, and n = 5 gives approximately $703.

How Much Money Must You Pay into an Account at the Beginning