Question

This is literally what the questions was. I was confused by it. Thus I am reaching out for clarification.

If you were to put $1,000 in the bank at 6% interest each year for the next 10 years, how much would you have as an ending balance in your account?

Present value of $1

Future value of $1

Present value of an annuity of $1

Future value of an annuity of $1

Answer 1

Answer: The correct option is "future value of an annuity of $1".

This question is actually asking for the table we would use to find the ending balance in the account.

Putting $1000 in bank each year for next 10 years is an example of annuity. Annuity refers to a series of payments of equal amount occurring at regular intervals.

To find present value of a sequence of equal payments that starts at end of current period we use a table called as present value of an annuity of $1. Similarly, to find the future value of a sequence of equal payments that begins at end of current period we use a table called as future value of an annuity of $1.
These tables will have rates and present or future values.
As the question is asking to find the ending balance in the account, we will look for future value of an annuity of $1 table.