A particular investment program involves continuously making small investments adding up to $3600 each year. If the investment pays 8%, and the account started off with an initial balance of $1000, how much will the account be worth in 40 years?
A) $1,083,496
B) $1,058,964
C) $24,533
D) $1,128,496

Question

Quizplus · Accepted Answer

Using the formula for the future value of an annuity:
FV = PMT x (((1 + r/n)^(n*t) - 1) / (r/n)) + PV x (1 + r)^t
where:
PMT = $3600 (annual payment)
r = 8% (annual interest rate)
n = 1 (number of times interest is compounded per year)
PV = $1000 (initial balance)
t = 40 (number of years)
Plugging in the values, we get: 
FV = 3600 x (((1 + 0.08/1)^(1*40) - 1) / (0.08/1)) + 1000 x (1 + 0.08)^40 = $1,083,496
Therefore, the account will be worth $1,083,496 after 40 years.

A Particular Investment Program Involves Continuously Making Small Investments Adding