If the current rate of interest is 8%,then the future value (FV)of an investment that pays $1000 per year and lasts 20 years is closest to:
A)$18,519
B)$45,762
C)$9,818
D)$20,000
E)$10,016

Question

Quizplus · Accepted Answer

We can use the formula for annuity (regular payments) to calculate the future value:
FV = PMT * ((1+r)^n - 1)/r
where PMT is the regular payment, r is the annual interest rate, and n is the number of periods (years in this case).

Substituting the values, we get:
FV = 1000 * ((1+0.08)^20 - 1)/0.08
FV = 45,762

Therefore, the closest answer is B, $45,762.

If the Current Rate of Interest Is 8%,then the Future