The FV_IFA for the future value of an annuity is 4.641 at 10% for 4 years.If we wish to accumulate $8,000 by the end of 4 years,how much should the annual payments be? A) $2,500 B) $2,000 C) $1,724 D) $2,200

Question

Quizplus · Accepted Answer

To solve for the annual payments, we use the formula:
Payment = Future Value / FVSIFA
Where FVSIFA is the Future Value of a Series of payments Increasing by a Factor of A.

Substituting the given values:
$8,000 = Payment x FVSIFA(10%,4)[in increasing annuity]
$8,000 = Payment x 4.641
Payment = $1,724.23 which is closest to option C ($1,724).

The FVIFA for the Future Value of an Annuity Is

The FV_IFA for the Future Value of an Annuity Is