Find the Value of an Annuity
-Looking ahead to retirement, you sign up for automatic savings in a fixed-income 401K plan that pays 5.5% per year compounded annually. You plan to invest $2000 at the end of each year for the next 25 years. How much will your account have in it at the end of 25 years?
A) $102,305
B) $104,075
C) $100,762
D) $103,603

Question

Quizplus · Accepted Answer

The future value of an annuity is calculated using the formula:FV = P * [(1 + r)^n - 1] / rwhere:P is the periodic paymentr is the annual interest raten is the number of periodsIn this case, P = $2000, r = 5.5%, and n = 25. Plugging these values into the formula, we get:FV = 2000 * [(1 + 0.055)^25 - 1] / 0.055= 2000 * [2.853 - 1] / 0.055= 2000 * 1.853 / 0.055= $102,305Therefore, the correct answer is A) $102,305.