Solve the problem. round to the nearest dollar if needed. looking ahead to retirement, you sign up for automatic savings in a fixed-income 401k plan that pays 5% per year compounded annually. you plan to invest $3500 at the end of each year for the next 15 years. how much will your account have in it at the end of 15 years?

a. $77,295

b. $75,525

c. $76,823

d. $73,982

Question

Business

Vincent Tanner

30 June, 19:10

Solve the problem. round to the nearest dollar if needed. looking ahead to retirement, you sign up for automatic savings in a fixed-income 401k plan that pays 5% per year compounded annually. you plan to invest $3500 at the end of each year for the next 15 years. how much will your account have in it at the end of 15 years?

a. $77,295

b. $75,525

c. $76,823

d. $73,982

+3

Answers (1)

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Atlas · Answer 1

To know how much you'll have by the end of the 15th year, you need to calculate the future value of an annuity as follows:

the future value of an annuity = investment [ (1 + interest) ^number of years - 1) ] / interest

Substituting with the givens, you can get the future value annuity as follows:

the future value of an annuity = 3500 [ (1+0.05) ^15 - 1) ]/0.05

= 75524.97 $

The correct choice is (b)