Julie expects to receive payments of $1,200 at the end of the year for the next 3 years. Assuming Julie invests the payments into an account earning 8%, how much will she have at the end of the 3 years?
A)$3,985.68
B)$3,600.00
C)$10,670.81
D)$3,092.52

Question

Quizplus · Accepted Answer

This is a future value of an annuity problem. The formula to calculate the future value of an annuity is FV = P * [((1 + r)^n - 1) / r], where P is the payment amount, r is the interest rate per period, and n is the number of periods. Plugging in the values: FV = 1200 * [((1 + 0.08)^3 - 1) / 0.08] = 1200 * [((1.259712) - 1) / 0.08] = 1200 * 3.2394 = $3,985.68.

Julie Expects to Receive Payments of $1,200 at the End