Question

Assume you are to receive a 30-year annuity with annual payments of $2,000. The first payment will be received at the end of Year 1, and the last payment will be received at the end of Year 30. You will invest each payment in an account that pays 6 percent annually compounded interest. What will be the value in your account at 55 years from today?​

Answer 1

Total FV= $678.615.02

Step-by-step explanation:

First, we need to calculate the value of the annuity at the end of the last payment:

FV= {A*[(1+i)^n-1]}/i

A= annual deposit

FV= {2,000*[(1.06^30) - 1]} / 0.06

FV= $158,116.37

Now, the total future value after 25 years:

FV= PV*(1 + i)^n

FV= 158,116.37*(1.06^25)

FV= $678.615.02