Question

Andrew invests $9,000 at the end of each year for 20 years. The rate of interest Andrew gets is 8% annually. Using the tables found in the textbook, determine the final value of Andrew's investment at the end of the twentieth year on this ordinary annuity. A. $88,362.90 B. $411,858.00 C. $88,632.90 D. $411,588.00

Answer 1

Given that Andrew invests $9,000 at the end of each year for 20 years. The rate of interest Andrew gets is 8% annually.

Now we need to determine the final value of Andrew's investment at the end of the twentieth year on this ordinary annuity.

So we can use annuity formula which is :

`S=R\left((\left(1+i\right)^n-1)/(i)\right)`

Where R=annual payment = 9000

i= rate of interest = 8% = 0.08

t= number of years = 20

S= future value

Now plug those values into above formula.

`S=9000\left((\left(1+0.08\right)^(20)-1)/(0.08)\right)`

`S=9000\left((\left(1.08\right)^(20)-1)/(0.08)\right)`

`S=9000\left((4.66095714385-1)/(0.08)\right)`

`S=9000\left((3.66095714385)/(0.08)\right)`

`S=9000(45.7619642981)`

S=411857.678683

Hence final answer is approx $411858.