Please Help Review Questions ch 678 o Question 8 of 30 in on

Review Questions (ch. 6,7,8 o Question 8 (of 30) in one year your wealthy younger sister will begin depositing $5,000 each year into a savings account for your retirement The account will compound Interest at 5 percent annually and you can\'t withdraw any money from the account until you retire in 40 years. Which of the following statements is correct? The accounts value at retirement is given by ss.… The total amount of interest you will earn wil equal S500 ,.05% 40. O The present value of this investment is equal to $500. O The interest you earn 6 yeors from now will equat the interest you earm 10 years from now O The future value of the account is equal to $500 (1-0050

Solution

Option A is correct since the formuale for future value annuity
=periodic payment*((1+rate)^year)-1)/rate
Option B incorrect since total interest own is =total amount at retiremnet-amount investesd
=5000*(1.05^40)-1)/5%=603999
=603999-(5000*40)=403999
option C incorrect since it is =PV(5%,40,5000,0,0)=85795.43
option D and E also incorrect