An individual is planning to set-up an education fund for her daughter.She plans to invest $7,000 annually at the end of each year.She expects to withdraw money from the fund at the end of 9 years and expects to earn an annual return of 8%.What will be the total value of the fund at the end of 9 years? (PV of $1,FV of $1,PVA of $1,and FVA of $1) $\bold{\text{(Use appropriate factor(s) from the tables provided.) }}$

A) $87,413
B) $68,040
C) $50,400
D) $126,000
E) $45,360

Question

An individual is planning to set-up an education fund for her daughter.She plans to invest $7,000 annually at the end of each year.She expects to withdraw money from the fund at the end of 9 years and expects to earn an annual return of 8%.What will be the total value of the fund at the end of 9 years? (PV of $1,FV of $1,PVA of $1,and FVA of $1)

\bold{\text{(Use appropriate factor(s) from the tables provided.) }}

A) $87,413
B) $68,040
C) $50,400
D) $126,000
E) $45,360

Makayla Gurnik · Accepted Answer

Final Answer : A, Explanation :  Using the Future Value of Annuity (FVA) table, we can find the factor for investing $7,000 annually for 9 years at 8% to be 12.983.Therefore, the total value of the fund at the end of 9 years would be:$7,000 x 12.983 = $90,881Using the Present Value of a Single Amount (PV) table, we can find the factor for receiving $90,881 in 9 years at 8% to be 0.545.Therefore, the present value of $90,881 in 9 years would be:$90,881 x 0.545 = $49,540So, the best choice is A because it gives us the correct total value of the fund at the end of 9 years.

Definitions

Learning Objectives

Learning Objectives

Related questions