The future value of a $2,000 annuity due deposited at 8 percent compounded annually for each ofthe next 10 years is ________.
A) $13,420
B) $31,291
C) $28,974
D) $14,494

Question

The future value of a $2,000 annuity due deposited at 8 percent compounded annually for each ofthe next 10 years is  ________.
A) $13,420
B) $31,291
C) $28,974
D) $14,494

Quizplus · Accepted Answer

Using the formula for future value of an annuity due, we have

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

where PMT is the periodic payment, r is the interest rate per period, and n is the number of periods.

Here, PMT = $2,000, r = 0.08, and n = 10.

Plugging in the values, we get

FV = $2,000[((1 + 0.08)^10 - 1)/0.08](1 + 0.08)
   = $2,000[14.486](1.08)
   = $31,291.20

Therefore, the best choice is B.

The Future Value of a $2,000 Annuity Due Deposited at 8