The IF 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) none of these

Question

Quizplus · Accepted Answer

We can use the formula for future value of an annuity:

FV = PMT[(1+r)^n - 1]/r

Plugging in the given values:
4.641 = PMT[(1+0.1)^4 - 1]/0.1

Solving for PMT:
PMT = 8,000/(1.1^4-1)/4.641
PMT = $1,724.29

Therefore, the annual payments should be $1,724, which corresponds to choice C.

The IF for the Future Value of an Annuity Is