Exercise C-6 Calculate the future value of an annuity (LOC-3) GMG Studios plans

Question

Exercise C-6 Calculate the future value of an annuity (LOC-3) GMG Studios plans to invest $60,000 at the end of each year for the next three years. There are three investment options available Interest Period nual Rate Compounded Invested Option 1 Option 2 Option 3 Annually Ann 8 3 years 3 years 3 years lly Required Determine the accumulated investment amount by the end of the third year for each of the options. (FV of $1, PV of S1. FVA of S1. and PVA of S1) (u provided.) Accumulate investment amount Option 2 Option 3 References eBook & Resources

Explanation / Answer

Future Value of Annuity = P [ {( 1+r) ^ n-1/r}]

Option 1:

= $ 60,000* [ { ( 1+7/100) ^ 3 -1 }/ 7%]

= $ 60,000 * 3.2149

= $ 192,894

Option 2:

= $ 60,000* [ { ( 1+9/100) ^ 3 -1 }/ 9%]

= $ 60,000 * 3.2781

= $ 196,686

Option 3:

= $ 60,000* [ { ( 1+11/100) ^ 3 -1} /11%]

= $ 60,000 * 3.3421

= $ 200,526

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