Calculation of the amount of the equal periodic payments that would be required at the end of each year to accumulate a $20,000 fund at the end of the tenth year is most readily determined by reference to a table that shows which of the following?
A) Future value of $1.
B) Future value of annuity of $1.
C) Present value of a single sum.
D) Present value of $1.

Question

Quizplus · Accepted Answer

The problem asks for the calculation of equal periodic payments in order to accumulate a fund at the end of a certain period of time. This is a classic example of an annuity problem. Therefore, the most suitable table to use is the one that shows the future value of an annuity of $1, which will help determine the amount of each payment needed to accumulate the desired fund. The future value of $1 table (A) and present value tables (C and D) are not as relevant to this problem.

Calculation of the Amount of the Equal Periodic Payments That