Question

To pay for her college education, Gina is saving $2,000 at the beginning of each year for the next eight years in a bank account paying 12 percent interest. How much will Gina have in that account at the end of 8th year?
A. $16,000
B. $17,920
C. $24,600
D. $27,552

Answer 1

Answer:

D. $27,552

Explanation:

Saving per year = PMT = $2,000

Interest rate = r = 12%

Number of year = n = 8

Use following formula to calculate future value of Gina's Investment at the end of 8th year.

FV = PMT [( ( 1 + r )^n ) - 1) x ( 1 + r ) ) / r]

FV = $2000 x [( ( 1 + 0.12 )^8 ) - 1 x ( 1 + 0.12 ) ) / 0.12]

FV = 27,551.31 (Close to 27,552)

So, the correct option is D. $27,552