Question

please choose one answer

An annuity pays $51 per year for 28 years. What is the future value (FV) of this annuity at the end of those 28 years, given that the discount rate is 6%? OA. OB. OC. OD. $4,193.92 $4,892.90 $2,096.96 $3,494.93

Answer 1

Answer = D.

$\fn_cm Future\, value\, of\, annuity = P\left [ \frac{(1 + r)^{n} - 1}{r} \right ]$

where,

P = payment

r = rate

n = number of years

P = $51

r = 6% = 0.06

n = 28 years

$\fn_cm Future\, value\, of\, annuity = 51\left [ \frac{(1 + 0.06)^{28} - 1}{0.06} \right ]$

$\fn_cm Future\, value\, of\, annuity = 51\left [ \frac{5.1116866969 - 1}{0.06} \right ]$

$\fn_cm Future\, value\, of\, annuity = 51\left [ \frac{4.1116866969}{0.06} \right ]$

$\fn_cm Future\, value\, of\, annuity = 51\left [ 68.528111615 \right ]$

$\fn_cm Future\, value\, of\, annuity = 3494.93369236$

FUTURE VALUE OF ANNUITY = $3,494.93