Tom and Suri decide to take a worldwide cruise. To do so, they need to save $15,000. They plan to invest $2,500 at the end of ea

Question

3 years ago

8

Tom and Suri decide to take a worldwide cruise. To do so, they need to save $15,000. They plan to invest $2,500 at the end of ea

ch year for the next six years to earn 9% compounded annually. Calculate the future value of the investment. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use appropriate factor(s) from the tables provided. Round your answer to 2 decimal places.)

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1 answer:

8_murik_8 [283] · Answer 1 · 2022-07-18T01:37:13+03:00

Answer: $18,808.25

Explanation:

There is a constant cashflow of $2,500 making this an annuity.

The future value of the $2,500 paid every year for 6 years at 9% will be;

Future value of Annuity = 2,500 * Future Value of Annuity factor, 6 periods, 9%) (refer to attached table)

= 2,500 * 7.5233

= $18,808.25

The future value of the amount is more than the amount they would require.