Use the ordinary annuity formula to determine the accumulated amount in the annuity. Round the answer to the nearest cent.
-$1000 invested annually for 12 years at 5% interest compounded annually
A) $3420.68
B) $35,917.13
C) $15,917.13
D) $14,206.79

Question

Quizplus · Accepted Answer

The formula for the future value of an ordinary annuity is $A = P \frac{(1 + r)^n - 1}{r}$, where $A$ is the future value of the annuity, $P$ is the annual payment, $r$ is the annual interest rate (in decimal form), and $n$ is the number of payments. Plugging in the given values: $A = 1000 \frac{(1 + 0.05)^{12} - 1}{0.05}$, calculating this gives approximately $15,917.13.

Use the Ordinary Annuity Formula to Determine the Accumulated Amount