Question

Lance Rice has decided to invest $1,200 quarterly for 8 years in an ordinary annuity at 4 percent. The total cash value of the annuity at end of year 8 is:

$46,642.80

$44,992.92

$46,246.80

$44,292.92

None of these

Answer 1

If you invest $1,200 quarterly for 8 years at 4 percent interest, at the end of 8 years you will have $45997.42

Answer 2

The total cash value of the annuity at end of year 8 is $44,992.92

Explanation:

Lance Rice has decided to invest $1,200 quaterly for 8 years in an ordinary annuity at 4%.

Formula for future value of ordinary annuity

`F_(OA)=A\left [ (\left (1+(r)/(n)\right)^(nt)-1)/((r)/(n)) \right ]`

where ,

A is investment $1,200

r is rate of interest, 4%

t is time 8 years.

n is number of period per year , n=4

`F_(OA)=1200\left [ (\left (1+(4)/(400)\right)^(4* 8)-1)/((4)/(400)) \right ]`

`F_(OA)=44992.92`

Thus, The total cash value of the annuity at end of year 8 is $44,992.92