Question

Jill starts to save at age 25 for a vacation home that she wants to buy for her 50th birthday. She will contribute $2500 each year to an account, which earns 1.3% annual interest, compounded quarterly. What is the future value of this investment, rounded to the nearest dollar, when Jill is ready to purchase the vacation home?

A. $73,712
B. $73,951
C. $294,847
D. $295,806

Answer 1

1.013=r^4

r=1.013^.25

F=2500(1-(1.013^.25)^n)/(1-1.013^.25)

F=2500(1-(1.013^.25^100))/(1-1.013^.25)

F=294606.19

So the answer is C. $294847, (they must have done intermediate rounding which leads to the slight discrepancy)

Answer 2

FVAO=2500[((1+0.013/4)^(4*25)-1)/(0.013/4]
FVAO=294,847.29
The answer is c