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future value of an annuity

You want to go to Europe 5 years from now, and you can save $3,100 per year, beginning one year from today. You plan to deposit the funds in a mutual fund that you think will return 8.5% per year. Under these conditions, how much would you have just after you make the 5th deposit, 5 years from now?

a. $18,369
b. $19,287
c. $20,251
d. $21,264
e. $22,327

Solution Preview

Let's take a look the first saving of $3100.
With interst compounding yearly, its valua at the end of the 5th year is
A1 = P(1+i)^4
where p =$3100 is your principal ...

Solution Summary

It provides detailed steps of calculating the future value of an annuity.