Question

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

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)