Question

Suppose you start an annuity where you invest $2,000 at the beginning of each year and 4% interest is paid at the end of the year. What is the value of the annuity at the end of 5 years, rounded to the nearest dollar? It is

Answer 1

10833

Step-by-step explanation

Use the formula

Sₙ=a₁
`(1-r^n)/(1-r)`

a₁= 2000

r= 1+4%=1.04

n=5

plug back into equation

S₅=2000
`(1-1.04^5)/(1-1.04)` =10832.6

Rounded to the nearest dollar $10,833

Answer 2

$10,400

Explanation:

If 2,000 dollars are being invested at the beginning of each year and gets a 4% interest at the end that means 2,000*104%=$2,080

It also continues on for 5 years so 2,080*5=$10,400