Question

Alfred invests $60 a month in an annuity that earns 4% apr and is compounded monthly. what is the future value of alfred's account in 5 years? a. $4900.18 b. $4361.82 c. $3977.89 d. $3752.19

Answer 1

To find the future value of Alfred's annuity investment, we use the formula for the future value of an annuity with monthly compounding. The calculation takes into account the monthly investment amount, annual interest rate, amount of compounding periods per year, and the number of years the money is invested.

Step-by-step explanation:

The question asks us to calculate the future value of an annuity with a monthly investment of $60, an annual interest rate of 4% which is compounded monthly, over a period of 5 years. The future value of an annuity can be calculated using the formula:

FV = P × ((1 + r/n)(nt) - 1) / (r/n)

Where:

• FV = future value of the annuity
• P = amount of each annuity payment ($60)
• r = annual interest rate (0.04)
• n = number of compounding periods per year (12)
• t = number of years the money is invested (5)

Plugging these values into the formula, we can calculate Alfred's future value of his investment.