Question

Lance Rice has decided to invest $1,200 quarterly for eight years in an ordinary annuity at 4%. The total cash value of the annuity at end of year 8 is (use the tables in the handbook):

Answer 1

First step is to compute for the interest that is gained from the described investment.
I = P x i x n
where P is the principal amount, i is the interest rate, and n is the number of years.
I = ($1200) x 0.04 x 8 = $384
Then, we add the interest gained to the original amount.
F = P + I = ($1200) + ($384) = $1584
Thus, the amount after 8 years is $1584.