A friend of yours plans to begin saving for retirement by depositing $2,000 at the end of each year for the next 25 years. If she can earn 10% annually on her investment, how much will she have accumulated at the end of 25 years?
A) $50,000
B) $196,692
C) $100,000
D) $216,361

Question

Quizplus · Accepted Answer

The future value of an annuity is calculated using the formula: FV = PMT * [(1 + r)^n - 1] / rwhere:PMT is the annual paymentr is the annual interest raten is the number of yearsIn this case, PMT = $2,000, r = 10%, and n = 25. Plugging these values into the formula, we get:FV = $2,000 * [(1 + 0.10)^25 - 1] / 0.10= $2,000 * [6.386 - 1] / 0.10= $2,000 * 5.386= $196,692Therefore, the correct answer is B) $196,692.

A Friend of Yours Plans to Begin Saving for Retirement