Question

Kia deposited $1,200, at the BEGINNING of each year for 30 years in a credit union...

Kia deposited $1,200, at the BEGINNING of each year for 30 years in a credit union account. If the account paid 12% interest, compounded annually, use the appropriate formula to find the future value of her account.

a. $311,097.91

b. $288,399.20

c. $298,569.33

d. $324,351.13

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Homework Answers

Answer #1

Present Value of Ordinary Annuity= $ 1,200 * 1/(1.12) ^ 1 + $ 1,200 * 1/(1.12) ^ 2 +$ 1,200 * 1/(1.12) ^ 3+...+$ 1,200 * 1/(1.12) ^ 30

= $ 9666.220761 (approx)

Present Value of Annuity Due = Present Value of Ordinary Annuity * ( 1+ Rate of interest)

= $ 9666.220761 * ( 1+ 12/100)

= $ 10826.16725

Future Value = Present Value of Annuity Due * ( 1+ Rate of interest ) ^ Time

= $ 10826.16725 * ( 1+12/100) ^ 30

= $ 324,351.13

Hence the correct answer is d. $ 324,351.13

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