Question

You are considering depositing $100 a month for the next 20 years in an account that provides a return. Which of the following will most likely increase the future value of this annuity?

• While the sum of deposit stays constant, contribute a higher dollar amount earlier instead of evenly distributing your contributions.
• While the sum of deposit stays constant, contribute a lower dollar amount earlier instead of evenly distributing your contributions.
• Choose a safer investment to contribute to.
• All of the above.
• None of the above.

Answer 1

If you are considering to deposit $100 a montu for the next 20 years in an account that provides a return, the best way to increase your future value is by-

While the sum of deposit stays constant, contribute a higher amount earlier instead of evenly distributing your contributions

By contributing a higher amount earlier, we will earn a higher return on the principal annuity as return. There will be more years over which the higher amount will be paid an interest on and would increase the future value.

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