The future value of an ordinary annuity of $1,000 each year for 10 years, deposited at 3 percent, is ________.
A) $ 8,530
B) $11,464
C) $10,000
D) $11,808

Question

Quizplus · Accepted Answer

We can use the formula for future value of an ordinary annuity:

FV = PMT x ((1+i)^n - 1) / i

Where:
PMT = $1,000 (the yearly payment)
i = 3% (the interest rate)
n = 10 (the number of payments)

Plugging in the values, we get:

FV = $1,000 x ((1+0.03)^10 - 1) / 0.03
FV = $1,000 x (1.344 - 1) / 0.03
FV = $1,000 x 11.4667
FV = $11,466.70

Rounding to the nearest dollar, the answer is $11,464, which is choice B.

The Future Value of an Ordinary Annuity of $1,000 Each