Question

The treasurer of GHI International expects to invest $120,000 of the firm's funds in a long-term investment vehicle at the end of each year for the next 8 years. He expects that the company will earn 9% interest that will compound annually. The value that these payments should have at the end of the 8-year period is calculated as:

Select one: a. $1,323,417 b. $1,190,084 c. $1,656,750 d. $1,390,084 e. $1,056,750

Answer #1

Future Value of Annuity

Where r is the rate of return for 1 compounding period that is 1 year i.e. 9% OR 0.09

n is the no of compounding periods i.e 8 years

= 1,323,416.85 OR 1,323,417

Option A is correct.

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