16
QuizMultiple Choice

Annuities

Question 16 • FT GMS AMDM B IC – 72

Lou has an account with $10,000 which pays 6% interest compounded annually. If to that account, Lou deposits $5,000 at the beginning of each year for 2 years, find out the amount in the account after the last deposit.

Answer
A
$10,300.00
B
$20,300.00
C
$21,500.00
D
$22,154.00

Explanation

The two deposits are made at the beginnings of the two years, so the first earns interest for 2 years and the second for 1 year. After 2 years, the account contains $10,000(1.06)² + $5,000(1.06)² + $5,000(1.06) = $22,154. The correct choice is $22,154.00.

AI-written and checked against the verified answer.

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