Question

Shaun is planning to invest $570 in a mutual fund at the end of each of the next eight years. If his opportunity cost rate is 6 percent compounded annually, how much will his investment be worth after the last annuity payment is made?

Answer 1

$5,641.56

Step-by-step explanation:

Since the constant amount is paid at the end of each year, therefore the investment at the end of the eight year will be determined through the future annuity formula which is given as follow:

Investment value after eight years=R[(1+i)^n-1)/i]

Where

R= annual payment=$570

i= interest rate=6%

n=number of payments to be made=8

Investment value after eight years=570[(1+6%)^8-1)/6%]

=$5,641.56