nees compounded monthlyi he obecive of hese deposts is to ac

nees compounded monthly,i he obecive of hese deposts is to accumulate $110,000 by the end of the tourth year, what is the amount of each OA. $2.292 O B. $2037 O C. $1.83 O D. $2.193

Solution

Annuity is series of equal cash flows for certain period of time, if periodic cash flow is P, number of period is n, and interest per period is r then future value of cash flow will be

FV of annuity = P [(1 + r)^n - 1]/ r

Let\'s put the values in the formula,

110000 = X* [(1 + 0.01)^48 - 1]/ 0.01

110000 = X* [(1.01 )^48 - 1]/ 0.01

110000 = X* ( 1.6122260777 ) - 1/ 0.01

110000 = X* ( 0.6122260777 )/ 0.01

110000 = X* * 61.22260777

X = 110000/ 61.22260777

     = 1796

Correct answer is E.

Pls note there is slight mismatch in the final answer that is due to intermediate calculation round offs.