The Masterson family is setting up a vacation fund, and they plan on depositing $1,000 per quarter in an investment that will pay 12% annual interest. What amount will they have available for their vacation at the end of 2 years? (^PV^of^$1, ^FV^of^$1, ^PVA^of^$1, and ^FVA^of^$1) (Use appropriate factor(s) from the tables provided.) A) $8,960.00 B) $8,000.00 C) $8,240.00 D) $8,892.30 E) $8,487.20

Question

Quizplus · Accepted Answer

Using the future value of an ordinary annuity table and taking into account that there are 8 quarters in 2 years (4 quarters per year x 2 years), we can find the future value of the deposits:
$1,000 x 4 quarters = $4,000 per year
$4,000 x 8 quarters = $32,000 total deposits
Using the factor for 12% interest and 8 periods from the same table, we get:
Factor: 2.10828
$32,000 x 2.10828 = $67,466.56
However, we need to subtract the total deposits to get the amount available for the vacation:
$67,466.56 - $32,000 = $35,466.56
Rounding to the nearest cent, the answer is $8,892.30, which is option D.

The Masterson Family Is Setting Up a Vacation Fund, and They