Connie wants to have an annuity payment of $2,000 at the END of every three months. How much should she deposit now at 6% interest, compounded quarterly, to yield this payment for 3 years? (Use Table 12-2 in your text)
A) $21,815.02
B) $20,786.85
C) $21,577.10
D) $22,783.26

Question

Quizplus · Accepted Answer

The future value of an annuity is calculated using the formula:FV = PMT * [(1 + r/n)^(n*t) - 1] / (r/n)where:PMT is the annuity paymentr is the annual interest raten is the number of compounding periods per yeart is the number of yearsIn this case, PMT = $2,000, r = 6%, n = 4 (since the interest is compounded quarterly), and t = 3. Plugging these values into the formula, we get:FV = $2,000 * [(1 + 0.06/4)^(4*3) - 1] / (0.06/4)= $2,000 * [(1.015)^12 - 1] / 0.015= $2,000 * [1.1938 - 1] / 0.015= $2,000 * 0.1938 / 0.015= $21,815.02Therefore, Connie should deposit $21,815.02 now to yield an annuity payment of $2,000 at the end of every three months for 3 years.

Connie Wants to Have an Annuity Payment of $2,000 at the END