Question

The Masterson family is setting up a vacation fund, and they plan on depositing $1,000 per quarter in an investment that will pay 12% annual interest. What amount will they have available for their vacation at the end of 2 years? (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)

Answer 1

Answer:

$8,892.34

Explanation:

This question is an ordinary annuity type of question. It can be solved using a financial calculator. Input the following to solve for the future value of the annuity deposits;

Recurring payment; PMT = -1,000

Duration of investment; N = 2*4 = 8 quarters

One-time present cashflow; PV = 0

Quarterly interest rate ; I = 12% /4 = 3%

then compute the future value ; CPT FV = $8,892.34