Toby Martin invests $2,000 at the end of each year for 10 years in an ordinary a

Question

Toby Martin invests $2,000 at the end of each year for 10 years in an ordinary annuity at 11% interest compounded annually. What is the final value of Toby’s investment at the end of year 10? (Do not round intermediate calculations. Round your answer to the nearest cent.)

Toby Martin invests $2,000 at the end of each year for 10 years in an ordinary annuity at 11% interest compounded annually. What is the final value of Toby’s investment at the end of year 10? (Do not round intermediate calculations. Round your answer to the nearest cent.)

Explanation / Answer

We use the formula:
A=P(1+r/100)^n
where
A=future value
P=present value
r=rate of interest
n=time period.

Hence

A=2000(1.11)^9+2000(1.11)^8+2000(1.11)^7+........+2000(1.11)^1+2000

2000[1.11^9+1.11^8+.............+1.11+1]

=$2000*16.72200896

=$33,444.02(Approx).

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