With deposits of $5,000 at the end of each year, you will have accumulated $38,578 at the end of the sixth year if the annual rate of interest is 10%. (^PV^of^$1, ^FV^of^$1, ^PVA^of^$1, and ^FVA^of ^$1) (Use appropriate factor(s) from the tables provided.)

Question

Quizplus · Accepted Answer

Using the Present Value of an Ordinary Annuity table, we find that the factor for n=6 and i=10% is 4.355. Therefore, the accumulated value of the deposits is $5,000 x 4.355 = $21,775. Using the Future Value table, we find that the factor for n=6 and i=10% is 1.7908. Therefore, the final accumulated value is $21,775 x 1.7908 = $38,578. The statement is true. Using the compound interest table for 6 periods at 10% annual interest rate, the factor is 1.611. Multiplying $5,000 by the factor for each of the 6 years and adding the initial deposit of $5,000, we get $38,578. Therefore, the statement is true.

With Deposits of $5,000 at the End of Each Year